Views on commodities and energy
Rain Makes Grain — Will It In Argentina?
The trigger point for Chicago Board of Trade grain and soy markets in the week beginning Sunday night, Jan 25, will remain the dry weather persisting in Argentina, the world’s third largest soybean grower and No. 2 corn exporter.
Argentina’s beef industry and its wheat and corn production are being slammed by the country’s most severe drought since 1961, which has also affected agriculture in neighboring Uruguay, Paraguay and southern Brazil.
Drought continues to slash corn and soy yields in Argentina and the country’s grain exchange on Friday said soy output could fall by as much as 25 percent and corn by 40 percent from last year.
End-week profit-taking trimmed early gains on Friday as some weather forecasts shifted late in the session to begin showing chances of a bit more rain.
“The movement of a cold front is slower than it was yesterday which could increase the amount of rain and it will likely increase the coverage,” Mike Palmerino, a DTN Meteorlogix forecaster, said.
On Friday, CBOT March corn could not break through $4.01 and March soybeans failed to penetrate $10.34-1/4 — key resistance areas.
“There is just too much uncertainty about the weather. No one wants to go home with a position this weekend,” one CBOT veteran trader said on Friday.
This was one of the most stressful weeks for Argentine crops as temperatures climbed into the low 100s degrees F.
Crop watchers know corn and soy yields have been cut but it is a question of how short output will be, especially if the weekend rains disappoint.
The most recent crop estimates were issued by the Buenos Aires Grains Exchange on Friday. The exchange forecast Argentine soybean output to fall 17-25 percent from 48.02 million tonnes last season. Argentine corn output could fall 33 to 40 percent, from 21.06 million tonnes the previous season.
The outside markets, in particular Wall Street, will also play into the grain markets.
Wall Street is in the midst of an earnings free fall and will be eyeing any moves from the White House to revive banks and craft an economic recovery plan. Of particular interest will be the Federal Open Market Committee’s statement from meetings on Tuesday and Wednesday for clues on how the Federal Reserve will address the situation.
Photo: Northern Illinois field taken by Chris Stebbins