Bearish Weather Factors May Start Grains Lower
A lower start is expected in all pits this am, 5 in wheat and beans with corn off around 10. Weekly export sales were good for wheat, 538,000 tonnes. Corn was in line, 343,000 tonnes, as was meal, 94,000 tonnes. Bean sales were slow, 171,000 tonnes, as was oil, just 1000 tonnes and rice, 15,000 tonnes. Egypt was in the market for optional origin wheat but they cancelled this am. Crude oil is higher but so is the $, giving mixed signals to our grain market. Dalian, China grain futures were lower except for corn, which was a little higher.
Argentine farmers have extended their strike at least until tomorrow night and a further extension is possible. The longer this strike continues, the more switching of export business in beans, meal and oil from Argentine origin to US/Brazilian origin is likely, which is bullish for our bean complex, of course. China is out of the corn export business this year and there is a report, that I haven't had a chance to read yet, that China could import as much as 10 million tonnes of corn a year within 2 years, which would be very bullish for our corn market, obviously.
There is some rain in the generally dry Argentine wheat belt today but mostly dry weather is forecast for the following several days, keeping the need for additional moisture growing. Australia saw some much needed rain over the last 24 hours in their biggest wheat producing state, New South Wales, but mostly dry weather is forecast the next week or so. A lot more rain is needed very soon to avert furrther cuts in estimated wheat production this season.
The latest report from the Army Corp of Engineers this am says 23 Mississippi River levees have been breached and two dozen more are in danger of being breached, flooding many more thousands of acres of farmland.
The US southwest winter wheat belt will remain wet the next several days. Up to 1" fell yesterday and rain today through Saturday will drop up to another 1" with additional rain forecast Sun-Tue. All this moisture will delay harvesting of the crop. The midwest was mostly dry yesterday and more of the same is likely today although some scattered rain is forecast in Missouri and Neb. Light, scattered rain is expected over the weekend into early next week in the midwest but nothing significant until around Tuesday, when up to 1" is expected. The 6-10 day calls for above normal rain in the western half of the belt with below normal rain in the eastern half. Generally, the forecast is bearish with warmer and drier weather in the picture for the next week or longer. To keep the grain rally going, weather extremes are needed.
We are already at elevated levels, at or near all time highs in corn and beans, and without any more large scale weather problems, prices are likely to set back from here. Having said that, I would still give the bulls the benefit of the doubt for now. We have big profits on the long side so I would stick with the long side. ---Vic Lespinasse
