Higher Grains Start Expected As Confidence Grows
A higher to sharply higher start is expected this am, roughly 7-10 wheat, 10 corn and 35 beans following similarly large overnight gains. Dalian, China grain futures were much higher again today with beans limit up again as China moves to build a 1.5 million tonne state reserve of this crop.
Strength in the equity markets was behind the big overnight gains in the grains while other commodity markets were also mostly higher. All this reflects growing confidence in the world financial system and if this attitude continues during the day, commodity prices, including grains, should continue well supported also.
Another private forecaster cut his Australian wheat production guess due to ongoing dry conditions in parts of the Australian wheat belt. Western Australia will benefit from rain and cooler temps this week but South Australian wheat prospects will continue declining from dry weather with little relief in sight. Temps are forecast to be very hot in South Australia late this week, further stressing the wheat crop there. Scattered weekend rains fell in Mato Grasso, Brazil's largest bean producing state, and more beneficial, welcome rain is forecast there early this week, along with cooler temps. Argentine wheat areas had a mostly dry weekend but welcome rain is expected tonight into tomorrow, up to 1.5" before dry weather returns the second half of the week.
The US southwest winter wheat belt was generally dry over the weekend but up to 1.5" rain is forecast tomorrow to Thursday. The midwest was mostly dry over the weekend with up to 2" rain forecast for the west Tue-Wed and scattered rain forecast Thursday while the east will see up to 1" light rain in the north today and Thur-Fri. The 6-10 day predicts cooler and drier weather, which should aid harvest efforts in corn and beans.
Nov bean options expire Friday. The latest committment of traders report Friday afternoon showed index funds liquidated more positions as of last Tuesday: 14,000 corn, about 5000 each in wheat and beans and 3000 oil.
Traders will keep watching the financial markets today for guidance in the grains. ---Vic Lespinasse
