U.S. export demand, weather to drive CBOT grain prices

July 13, 2009

illinois-bean-field-july-12U.S. grain traders look for a mild rebound in prices in coming days after agricultural commodities tumbled to multi-month lows last week.
    
Analysts cite the big drop in grain prices and the soft dollar as likely stirring fresh export interest in U.S. corn, wheat and even still-pricey soybeans — even though soy exports have been red-hot all season.
    
“It’s going to be export-demand driven,” said Terry Reilly, a grain market analyst with Citigroup in Chicago.
    
If the past week was any indication, sales may be hefty. Last week, wheat export sales were the biggest since last September at 584,200 tonnes, corn sales topped one million tonnes for the third straight week, and China booked more than 1.0 million tonnes of soybeans, including another 283,500 tonnes for delivery before the start of the 2009 U.S. harvest.
    
Any hint that U.S. Corn Belt weather will heat up this week could also feed a bounceback in Chicago Board of Trade grain markets. Corn, the biggest row crop, is now entering its key growth stage of pollination when too much heat and too little moisture can erode final yields.
    
“There’s really no premiums built into market in weather because the weather has been fantastic for the U.S. growing season,” Reilly said. “Any little shift in the weather outlook, you’ll start to see those premiums build in the grain markets.”
    
Corn likes warm days and cool nights. Mostly mild temperatures and sporadic showers have so far created an ideal environment for corn and soybeans in the mid-summer growing season.
    
Given the recent ideal weather, after a cold rainy spring that had delayed seeding, markets ended lower last week as the U.S. Agriculture Department’s monthly supply/demand outlook forecast rising grain stocks for a year from now.
    
“We’re in that doldrums point where we don’t have a lot to trade right now. We’re watching weather and that doesn’t necessarily change that much — conditions are favorable,” said one Chicago grains broker, who said that was a reason outside markets will also stay on the radar for grain traders.
    
Corn, wheat and soybeans fell last week but so did crude oil, gold and other commodities along with equity markets. G8 leaders met in Italy and optimism about any quick recovery for the world economy was absent.
    
In that shadow of weak overall economic demand it remains difficult for commodities to rally. Another a bit unnerving for Chicago grain traders has been the growing signs of increased government regulation coming for commodity markets.
    
Tuesday will mark the last day of trading for July grain contracts as they expire. Given the volatility in the July soybean contract over the past three weeks, plenty of fireworks will be expected by expiration.
PHOTO: Northern Illinois soybean field taken July 12 by Christine Stebbins

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