Grains Give Back Early Gains Overnight
Jan 28, 2013
Grains were higher at the start of the overnight session with beans leading on a 12-cent advance reaching the critical $14.50 area, but pulled back to the $14.45 range. Beans were up 4 cents, while corn posted a 2-cent change. Wheat was modestly lower.
Weather in Argentina continues to be a focus of the trade as concerns about excessive dryness has the potential to cut into record-large crops there. With Argentine soybeans 77% planted by a December 20 date which marks the end of the ideal window, and only 74% of corn, one-fourth of Argentina crops are at risk of drought stress from shallow rooting. And the crop may face significant deterioration if fears prove justified that a fresh La Nina is emerging, as some conditions, such as cooler Pacific water temperatures, indicate could be on the way. If La Nina materializes, not only does this bode poorly for Argentina’s dry streak continuing, but also drier-than-normal conditions are likely to persist in the US southern Plains.
For wheat, weather forecasts call for continued dryness in the southern Plains but some chances of rain in the upper Plains. Export tenders overnight were encouraging with Jordan and Bangladesh looking to import sizable wheat shipments from optional-origin sources. Last week’s US wheat export numbers came in above expectations at a combined 647,500 MT for old- and new-crop. If export demand continues to be strong in the coming weeks and no sizable moisture events in the Plains, wheat prices should show more upside potential.
In corn, lackluster ethanol demand and sluggish exports continue to keep prices drifting lower. Furthermore, the prospect of a jump in 2013 corn acreage keeps new-crop Dec futures on the defensive as well. However, the potential of sharply lower prices from here seems remote with exceptionally tight old-crop stocks and the threat of continued drought problems into 2013. As such, corn may be a follower to what transpires in the wheat market in coming weeks.