Grains in Major Year-End Sell Off
Vic Lespinasse Market Report - Pre Opening Grain Comments 12/31
A lower to sharply lower start is expected this am, led by beans. The early call is 10-20 lower beans, 1-2 down in corn and 3-5 weaker wheat. Remember, we close early today, noon central time. Traders are still talking about Friday's close, when prices sold off sharply in the last couple of minutes, especially beans in the electronic market. There is a widespread expectation that index funds, which are always only long, will be big sellers the first half of January in beans and wheat and big buyers of corn, rebalancing their portfolios. This might have been part of the reason for Friday's big sell off in beans and this could weigh on beans (and wheat) again today. In early Jan 2007, index funds sold over 50,000 corn, rebalancing their portfolios, and drove this pit down over 40 cents. Crude oil is higher this am and the $ is lower, a friendly combination for the grains. However, Malaysian palm oil is sharply lower this am, down 75 ringgit, which is negative for the bean oil market. Deliveries were in line in beans with Dreyfus putting out all 302 lots. Oil deliveries were much higher than expected, 9900, with ADM putting out 6600. Meal deliveries were also larger than expected, 1700, with ADM putting out 1400. ADM and Dreyfus are international commercial grain traders. There were no large commercial stoppers in any of the pits today. China is going to impose an export tax of 20% on wheat and oats along with a 5% export tax on corn, rice and beans starting tomorrow and continuing for the entire year, according to the Finance Ministry. This is meant to slow grain exports and fight food inflation, which has been running at a very high level in China this year. This is bullish for our corn market since China has been a big competitor in the world corn export market the last several years. It means less competition for our corn exports, which is bullish for corn prices. Argentina had only light, scattered weekend rain and only light, scattered rain is forecast, if any, this week in the main growing areas. Brazil, in contrast, had widespread weekend rains and more of the same is likely this week. Overall, conditions in Brazil are very favorable while Argentina remains on the dry side, in need of more rain soon. Remember, the very important USDA report will be out the am of Jan 11.
