Floor Talk January 4

[marketeye]

At the close:

The March corn futures settled unchanged at $6.58 1/2. The March soybean contract closed 2 1/2 cents higher at $12.30. The March wheat futures closed 7 cents lower at $6.50. The March soymeal futures finished $1.40 per short ton higher at $320.60. The March soyoil futures ended $0.08 lower at $53.03.

In the outside markets, the NYMEX crude oil is $0.25 per barrel higher, the dollar is higher and the Dow Jones Industrials are up 24 points.

Mike

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At mid-session:

The March corn futures are trading 1/2 of a cent lower at $6.58. The March soybean contract is trading 1/2 of a cent higher at $12.28. The March wheat futures are trading 4 cents lower at $6.53. The March soymeal futures are trading $2.00 per short ton lower at $319.00. The March soyoil futures are trading $0.21 lower at $52.90.

In the outside markets, the NYMEX crude oil is $0.38 per barrel lower, the dollar is higher and the Dow Jones Industrials are down 18 points.

One grain analyst says the trade is done pricing in this week's dry weather in Argentina. "With outside markets weaker we're seeing some long side profit-taking. Additionally, next Tuesday some rain looks to enter Argentina and could keep people from buying ahead of the weekend," he says.
Should the traders come into work Monday and see the markets open lower, it will be a great buying opportunity, he says. "The 11-day outlook sees the heat dome back in Argentina by January 14 and traders fear next Thursday's USDA Crop Report will be bullish, therefore no one will want to be short and speculators will want to buy long."

BEARISH Thoughts: One floor trader says to not get tripped up on this bullishness being provided by South America's weather.

He says, "I don’t want to mitigate the problem in South America, but I struggle to wonder if Argentina's crop loss in corn is going to make the difference in corn exports or not. The corn market has run 80 cents higher in two weeks. Plus, the ethanol producer continues to run in the red, with plenty of RIN’s out there. In addition, China prices are lackluster, with plenty of feed wheat still offered out of Eastern Europe. Also, Australia is still marketing a large crop.
"The last time I looked 94 million U.S. corn acres in 2012 was going to give us a 1.2 billion bushel carryout. Let’s see if we lose any more crop on next Friday’s Supply/Demand Report, before we start thinking about $7.00 corn."

Mike

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At the open:

The March corn futures opened unchanged at $6.58 1/2. The March soybean contract opened 3 1/2 cents lower at $12.24. The March wheat futures opened 3 1/2 cents lower at $6.54. The March soymeal futures opened $1.50 per short ton lower at $317.80. The March soyoil futures opened $0.31 lower at $52.39.

In the outside markets, the NYMEX crude oil is $0.13 per barrel lower, the dollar is higher and the Dow Jones Industrials are down 37 points.

Mike

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At 7:45am:

News and notes:

--Russia is expected to have rail troubles for the second half of its grain shipping season this year.

--Some rain has been put into Argentina's weather forecast. But it's not enough to break drought pattern.

--There's talk domestic and foreign end-users are not covered very well on supplies for future months.

--The unusual winter weather continues in the Midwest. Is this the calm before the spring storms?

Offer up your thoughts and/or research on any of these topics.

Mike

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At 6:35am:

Early calls: Corn 1-2 cents lower, soybeans 2-4 cents lower, and wheat 3-5 cents lower.

Trackers:
Overnight grain, soybean markets=Trading lower.
Crude Oil=$0.62 per barrel lower.
Dollar=Higher.
Wall Street=Seen trading weaker vs. yesterday's heady start to the new year. With investors putting Europe's debt crisis to the side, temporarily, all eyes are on this Friday's U.S. Jobs Report for December.

World Markets=Mixed.

What say you?

More in a minute,

Mike

[marketeye]

For 2011:
--CME Group agricultural commodities volume averaged 1.1 million contracts per day, up 19 compared with the prior year, the exchange announced Wednesday.

--MGEX today announced total Hard Red Spring Wheat (HRSW) futures and options trading volume reached 1,775,646 contracts in 2011, the second highest annual volume in the 130 year history of MGEX, according to an exchange press release Wednesday.

Mike

[giolucas]

Sell the rallies, buy the dips!

[marketeye]

giolucas,

That sounds like solid advice. It will be interesting to see, today, if the South America weather issue can trump unfavorable outside market pressure. Yesterday, all stars were aligned. Today, the key fundamental is pitted against the outsides. Who wins in this battle? I'm hearing the same from South America this morning vs. yesterday.

Also, I'm watching Friday's close. Some say that if January's second Friday has a close below the month's first Friday, a bearish pattern could set in. If January's second Friday close is higher than the first Friday, a positive price-pattern is emerging. Does anybody share that dynamic? Or, do you think that is bunk?

Mike

[Mizzou_Tiger]

can someone comment on the WASDE number versus whats likely happening in SA........

Argentina corn is pegged at 29MMT............estimates now range from 23-25..........I am sure Brazils crop is hurt some too........

Argentina soya is pegged at 52MMT and Brazil at 75MMT..........with a total output north of there.......estimates have come down at least 5MMT maybe more..........

Marketeye, anyone on the floor have a comment about what this does to world stocks.............on the world stocks stage we actually have lower stocks than a year ago for corn and soya...........and now inevitable cuts...........

[docharing]

Remember MT demand is drying up, this will no doubt raise ending stocks???????

[agmr]

The weather in South America keeps farmers anxiously waiting for rains to alleviate crop losses concerns.

Rains that occurred in key producing regions of Brazil in the last week of December brought new hope and expectation of recovery of production in some regions of Rio Grande do Sul and Parana  , in an area abt 50 % of the total . However, these rains are not sufficient for full recovery of the crop as there are reports indicating irreversible damage in more than 40% of production in some regions of the Northwest Rio Grande do Sul, southern and western regions of Mato Grosso do Sul, both in corn and soybeans.

The maps below show soil humidity in Argentina as of dec 28th ( obviuosly it has getting worse since  in the last 7 days due to absence of rainfall)

In Argentina the situation is not very different. The lack of rain has been punishing the corn and soybean producers. The month of December was the driest of the last four years, with an average cumulative rainfall of 20mm. According to the National Weather Service , the best chance for a significant rain event in the core production area comes in Jan 19-20 which would help some areas but it would be too late for others.

The FAA ( Arg Farmers Federation) has already requested governement assistant to those counties affected by the drought and declare an “emergencia agropecuaria” for small and medium farmers.

400 kms north of BsAs , one the areas most affected , some counties  have reported losses of up to 70% on the corn fields  leading farmers  to feed cattle with what is left

[agmr]

Paraguay

Jan 4th

The drought affecting much of the eastern region of Paraguay  in the Itapua Department,   the biggest farmer cooperative with 300,000 has of soybeans planted said  the loss there is already 30 %. This region has  weather pattern similarities with  part of Parana and RGS in Brazil, as it is located  and affected by the same  subtropical flow.

Planting called "early” , whose harvest is scheduled to start mid this month had already a sharp impact, and there are areas where the crop was lost directly and others that will be harvested, but with a performance quite lower than expected, ranging from 800 to 1,000 kilos per hectare, when the average yield ranges between 3,000 and 3,500 kilos per hectare,.

For his part, The president of the Cooperative  said that still can not quantify the level of final losses because there are some areas of the department where rains were reported, but further north and northeast Itapúa the impact of the lack rain was much stronger. “ We are very concerned, if it still does not rain the situation can become a disaster”, he said.

Further north is worse
Further north and northeast of the department, as in the districts of Natalio, Yatytay, San Rafael and Carlos Antonio Lopez, the situation is even more critical, because in this time zone the drought has been more prolonged .

[marketeye]

MT,

Here is a full response from a floor trader that I respect. He says, "Yes for Argentina it looks like corn production is down 4 to 6 mmt..and moving lower… for Beans we are in the 46-48 mmt range from lack of planting and poor weather… remember last year estimates were as low as 46mmt before rains came Jan 10th and there was a pattern change..final yields were 50 mmt.. but so far dry weather looks a little more intense than last year though not as bad as 2008-2009 when total bean production dropped 22 mmt including Paraguay in SA
 
CONAB started with a conservative Bean estimate for Brazil around 71 so WASDE looks a little high already in Brazil but may have been conservative to start given La Nina bias… Argentina most are now in the 46mmt type number so lets say at the moment the market is disounting a 10 mmt crop problem versus WASDE….. total stocks were projected to Increase 9 to 10 mmt this year by Sept 1 2012…given the large crop last year in SA and the poor export demand… so we are not that alarmed by the crop declines in SA as long as the weather stabilizes… however..that is not the case given the current forecast…. For now we can only watch the weather… I know that prior to the Harvest break we had good farmer selling from 7.30 down to 6.70 so I think we will get back into farmer selling rather quickly…(above 6.70 in corn)… but don’t think markets can break much given..important final reports and current weather forecast not predicting a pattern change…The weather is strange for North America as well… haven’t really broke southwest drought yet…
 
In 2008 I believe it was May before WASDE fully discounted the crop problem in SA…and that makes since as Argentine harvest does not wrap up until April."

Mike

[marketeye]

agmr,

Thanks for the information. It's great stuff. In your last post, you dated it Dec. 4. Did you mean January 4 instead of Dec. 4?

Thanks,

Mike