16 January 2013

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  • It would appear that the gains in recent days have proved too much as some profit taking has capped gains in CBOT markets to some degree. Corn (at the time of writing) is all but unchanged whilst wheat is marginally positive and the soybean complex is showing a greater degree of positivity. Improved weekly sales and large domestic crush would seem to be the drivers.
  • This ongoing position is likely to produce one of two outcomes: either higher prices and the rationing we have been calling for over the last few weeks, or the US runs out of soybeans and products (meal and oil). Some suggest that S America will come to the rescue and fill in the hole which appears to be growing at a rapid pace, however the logistics of both loading and discharge present some significant physical issues which have to be addressed, leaving the simple solution as perhaps less simple than at first might appear to be the case.
  • S American weather is starting to become a significant determinant for price action; Argentine corn and soybean crops are fast approaching their (weather delayed) key development stages of pollination and bloom. Corn development was delayed as a result of excessive rains in the last three months of 2012 although we have seen dryer conditions in recent weeks.
  • There would appear to be some evidence of a developing La Niña pattern which would indicate warmer and more arid conditions similar to those which persisted in S American regions last year. N Brazil has experienced dry conditions, or drought, and increasing temperatures and significant rainfall, above average, is required to allow for a good soybean crop in the key Matto Grosso region. As temperatures rise and crops develop the water requirement grows from both crop demands and evaporation – hence growing soil moisture deficit unless rains arrive. Helpfully though, S Brazil has abundant soil moisture levels, for now, following the earlier heavy rains which plagued Argentina and southern Brazil.