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The latest USDA world crop and supply/demand updates didn't have any negative numbers, but a negative investment reaction to the U.S. Administration's stimulus & bank bailout proposals lead to profit-taking at the CBOT. The USDA, however, did reduce their grain & soybean crop outlooks for South America, which will likely keep the market's focus on the region, particularly -- Argentina, which has experienced its worst drought in decades this year.
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Because of January's dryness, the USDA reduced Argentina's soybean crop 5.7 mmt to 43.8 mmt this month on a combination of 500,000 less hectares of harvested area and a yield decrease from 2.75 mmt/ha to 2.50 mmt/ha. They also reduced Brazil's bean crop prospects from 59 mmt to 57 mmt this month because of dryness hurting early season varieties in the southern states of Parana and Rio Grande. Adding in Paraguay's losses, South America's bean crop was shaved 9.3 mmt this month decreasing the government's world bean stocks estimate to 49.9 mmt, down 4.1 mmt from January. Because of these lower prospects, the USDA upped our 2008/09 U.S. exports (up 50 million). But, they also cut U.S.
domestic crush by 35 million bu. because of the current sluggish processing pace leaving this year's stock forecast at 210 million bu.
In corn, the USDA also reduced both Argentina's (3.0 mmt) and Brazil's (2.0 mmt) crops because of the region's ongoing La Nina induced dryness. These lower supplies and a recent pickup in overseas demand the past three weeks prompted the USDA to leave this year's U.S. ending stocks unchanged vs. expectations of a rise of 50-75 million bu. No changes were made in U.S wheat stocks as was expected with just minor changes in the world's 2008/09 output (Argentina -1 mmt & FSU +1 mmt) this month. This market's focus will be how the Northern Hemisphere's winter wheat (China, FSU & the U.S) breaks from its dormancy in the next month along with bean's price action. | |
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With Argentina's soybean crop still having another month of its growing season, weather in this region will remain a major factor for soybeans and the other CBOT markets. Country reports indicated that high input costs have producers considering more soybeans and less corn plantings for 2009. The USDA will release its first thoughts about 2009 U.S. spring plantings at their upcoming Ag Outlook Forum on February 26 & 27. These will be economic vs. survey-based numbers which won't come until March 31 intentions. Be prepared to move up 2008 & 2009 corn and bean sales if prices become volatile from Argentine crop concerns in the next few weeks.
Disclaimer
- The risk of trading can be substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Futures trading involves risk of loss. Trading advice is based on information taken from trades and statistical services and other sources which R.J.O'Brien believes are reliable. We do not assure that such information is accurate or complete and it should be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no assurance that the advice we give
will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future trading results.
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About the Author
Jerry Gidel is the president of Midland Research, Inc. and a research trading analyst for RJO Futures. In April 2003, he joined North America Risk Management Services, Inc. (NARMS) as an associate, specializing in the cash and futures grain markets.
With more than 30 years of experience in commodity analysis and brokerage, Jerry focuses on providing risk management services to livestock producers, grain producers, and commercial operations. He formed Midland Research in 1981 as a consulting firm working from the agricultural trading floor at the Chicago Board of Trade.
He has vast experience as a vice president and senior grain analyst at Dean Witter Reynolds, and as a grain market research analyst with several other leading commodity brokerage firms, including Paine Webber, G.H. Miller, LIT.
He earned an undergraduate degree in Ag business and a graduate degree in Ag economics from Iowa Statue University. He utilizes both fundamental and technical analysis in his market evaluation and brokerage services. | |
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