Views on commodities and energy
Weather, dollar likely to keep grains in recent ranges at harvest
If this week in Chicago Board of Trade grains is anything like the last couple, traders can expect plenty of volatility — lots of sound and fury — but with prices likely to stay in recent ranges.
“This really isn’t a trending kind of market,” said senior analyst Anne Frick with Prudential Bache Commodities.
Mother Nature and the dollar have had the biggest impact on grain prices this autumn. That looks set to continue. Analysts say those two uncertain and thus supportive price factors, countered by rising supplies of harvested grain, will tend to restrain “spikes” either way. Day-to-day moves on the other hand, are still seen as being more dictated by buy/sell trigger points on price charts and by speculative money flows.
Despite a steady to lower close in CBOT corn and soybeans on Friday, both closed higher on the week as did wheat. So some bullish technical indicators remain in place, analysts said. Fundamentals — huge U.S. harvests now under way — should be weighing on corn and beans. But U.S. farmers are struggling to wrap up the harvest. A soggy October has put them about four weeks behind on corn and, traders say, sowed seeds of doubt in the markets’ mind about final crop yields and quality.
Farmers finally saw some ideal harvest weather in November — warm, sunny days that allowed them to work all day and night to harvest and dry rain-soaked crops. But their luck may be running out. Rains are now forecast to return to the U.S. Corn Belt by Tuesday or Wednesday.
That is especially bad news for corn, as only about half the projected 13-billion bushel crop is expected to be off the field by Sunday, traders said. By contrast, they estimate soy harvest will be reported 90 percent complete when weekly crop progress updates are issued by the U.S. Department of Agriculture on Monday afternoon.
ARGENTINA DRYNESS STRIKES A NERVE
“No doubt for corn: weather is at the top of the list. And weather in South America for beans,” analyst Brian Basting with brokerage Advance Trading said, referring to concerns starting to surface about dryness in Argentina’s fields.
The world’s No. 3 soy producer is in the midst of planting its next soybean crop. Although it is too early in the season to get excited about the dryness and potential threat to yields, traders are hyper-sensitive to conditions in Argentina after a drought last season drastically reduced that important crop. The No. 1 concern now, traders noted, is in Cordoba, a top soy region in central Argentina.
Underscoring the current range-bound market mentality in grains, however, traders said any rallies in Chicago soybeans would likely be met by South American sales to price their new crop. That action was already detected on Friday.
“Once beans got above $10 in the March contract, we saw hedge sales out of South America,” said one CBOT floor broker with commercial grain clients.
Also, USDA on Nov. 11, repeated its rosy outlook for South America’s coming soy crops. It boosted the estimate of Brazil’s crop by 1 million tonnes to a record 63 million and raised its Argentine soy estimate 500,000 tonnes to 53 million. The U.S. crop this year equates to 90.3 million tonnes.
Aside from weather-related harvest news, the U.S. dollar will also remain a major influence on commodity prices. Generally, the two move inversely. A weak dollar lowers the price of U.S. grain exports for overseas buyers and attracts investorswho buy commodities as a hedge against inflation.
In recent months on days when the U.S. dollar was weak, corn futures rose 72 percent of the time, David Hightower of the Hightower Report told a CME grains panel last week.
Traders are also keeping a close eye on December corn options, which expire on Friday. Large open interest in the December $4 options is expected to act like a price magnet.
Photo: Northern Illinois corn field taken Nov. 8 by Christine Stebbins