Views on commodities and energy
Fundamentals coming to bear on grain futures
U.S. grain markets will get their direction this week from old-fashioned supply-and-demand fundamentals after being pushed around recently by outside influences such as movements in the U.S. dollar and the price of crude oil.
“I do think that we are starting to focus more on the fundamentals than we have (been),” said Don Roose, an analyst with brokerage U.S. Commodities in West Des Moines, Iowa. “We kind of had this little gap where it was uncertain on the fundamentals so the technicals and some of these outside markets could rule a little more.”
The U.S. Department of Agriculture is due to release its estimate of the 2009 corn and soybean crops on Tuesday morning. It will provide the market with plenty of data to chew on and should drive price movement throughout the week. The government also will provide its first estimate of how much winter wheat acreage was seeded in the United States last autumn.
Another key for the grains markets will be weather in South America, where farmers in Brazil and Argentina are harvesting soybean crops.
“(This) week is the fundamental week,” said Darrell Jobman, a senior analyst TraderPlanet.com, a commodity trade site. “(We will) kind of get a new picture of things. We haven’t had any real good reports … for a couple of months. There has been a kind of a dearth of information.”
Analysts were expecting 2009 U.S. corn production to fall from earlier forecasts as harvest delays and wintry conditions forced Midwest farmers to shut down harvest operations before the cutting was completed. An average of estimates pegged the corn crop at 12.821 billion bushels, down 100 million from the government’s December forecast.
“The key … is probably going to be corn because that is probably the most questionable one,” TraderPlanet.com’s Jobman said. “It could be a surprise either way.”
U.S. soybean production in 2009 was estimated at a record 3.338 billion bushels compared with the December forecast of 3.319 billion. Soybeans benefited from good weather at the end of the growing season.
“The dominant issue is certainly going to be about supplies,” Roose said. “I think it is going to be about supplies in the U.S. and around the world.”
Winter wheat acreage around the United States was seen falling 6.5 percent as declining prices, plentiful global supplies and poor weather during key planting periods kept farmers out of the fields. [ID:nN
USDA also will release data on corn, soybean and wheat stocks for the fourth quarter and the 2009/10 marketing year.
CORN, SOY SALES EXPECTED ON THE CASH MARKET
Expectations for a pick-up in farmer selling could add some pressure the futures market this week, said Rich Feltes, senior vice president of MF Global Research in Chicago.
Most farmers had halted their marketing activities during December for tax purposes and were looking to re-enter the market with March corn prices around $4 a bushel and soybean prices topping $10 a bushel.
Snowstorms across the Midwest during the past week contributed to the light sales on the cash market as most farmers did not want to brave icy roads to deliver supplies to elevators and processors.
Farmers were likely to use the corn and soybean production estimates as benchmark for determining potential sales this week.
World supplies also were expected to have an impact on grains markets during the coming week.
Traders will be monitoring the weather in Brazil and Argentina as growers there prepare to harvest their soybean crops. Wet and warm conditions in the region have bolstered expectations about a bumper crop and raised prospects of overseas buyers turning their attention to South America to satisfy their soy needs.
“The unfolding South American situation will be important,” Feltes said.