Views on commodities and energy
Good weather to press U.S. grain, soy futures
U.S. grain markets look headed for more seasonal harvest selling pressure on Monday after Midwest weather forecasts pointed to an active harvest weekend, but traders said the focus will quickly turn to the government’s next monthly crop report due a day later.
A lot hinges on Tuesday’s numbers. Typically, the November report confirms the U.S. Agriculture Department’s previous estimates. But given the unusually slow 2009 harvest pace amid persistent autumn rains, this month’s report will play a bigger role than usual in trade attitudes going forward.
“We’re going to get actual harvest data. So this report becomes more important for the industry and there is that element of surprise,” said Dan Basse, president of AgResource, a Chicago-based ag consultant.
Analysts polled by Reuters last week said on average they expect USDA to make a modest upward revision to its 2009 U.S. soy output forecast — up about 12 million bushels to 3.262 billion, surpassing the current record of 3.197 billion. Soybean demand is strong, but the supply number will matter.
“If those numbers get significantly larger, you’re going to see some pressure in beans,” said Dan Cekander, an analyst with Newedge USA in Chicago.
For corn, most analysts expect to see a downward revision due to the delayed harvest — down 78 million bushels to 12.94 billion. However, there were also a handful of analysts who said USDA could boost its forecast to approach the all-time high of 13.038 billion bushels harvested in 2007.
DOLLAR BULLS VERSUS HARVEST BEARS
While the weak dollar was key to the moves in commodities early last week, with grain prices rising as the dollar fell, it was all about harvest supplies the remainder of the week.
The net effect was corn for December delivery <CZ9> closing basically unchanged for the week at $3.67 a bushel. November soybeans <SX9> fell 3 percent to $9.48, and December wheat <WZ9> was down just a fraction at $4.97-1/4.
Traders said on Friday that unless U.S. economic fundamentals trigger a collapse in the dollar or crude oil rallies, breaking out of its $75-$80 a barrel range, a lower trend in grains was likely ahead of USDA report on Tuesday.
U.S. cash grain markets weakened across the Midwest on Friday as farmers worked around the clock to harvest crops. There were reports of farmers waiting hours in truck lines to dump freshly harvested corn and soybeans, and many country elevators were only taking grain every other day, as the magnitude of the harvest logjam created logistical nightmares.
That meant a pickup in harvest hedge sales on Friday, which will likely surface again when CBOT markets open Sunday night given the near-perfect weather forecast for the weekend.
USDA will issue its weekly crop progress data on Monday. As of late Friday, traders were expecting the government to report a huge advance with roughly 75 percent of the soy harvest complete, compared with 51 percent the previous week, and 40 percent of corn off the field, versus 25 percent a week ago.
“We have made some very good progress this week and heavy grain movement. One good thing about this pattern is we are going to fill the pipeline quickly,” Basse said.
Photo: It was an active harvest weekend across the U.S. Midwest. Illinois corn field taken Nov 8 by Christine Stebbins.