Coming back from the weekend there is a modest amount of bullish momentum built up in agriculture. All markets were higher across the board overnight led by beans which is gaining due to expansive dryness in Southern Brazil and central to Northern Argentina. This dryness has many holding their collective breath heading into the holiday with world corn stocks relatively tight while beans have a bit more room but not enough for the world to survive any major production disaster in the southern hemisphere. The one crop not directly threatened is wheat. Argentina is still set on production and India just announced a record 85.93 MMT crop. World wheat stocks are ample and there is only modest concern in the US plains with the current blizzard causing both good and bad results. The possible bullish story for wheat is strictly in Ukraine with some talk of a 30% total loss with another 70% (of the remaining) expected to show very poor quality due to drought and temperature extremes. This adds to the world feed wheat total while making higher protein wheat a continuing issue moving into the final stretch of 2012.

With macros seeming content at current levels there is little direction from outside influences. This allows a small problem in S. America to help oversold daily indicators to bounce. A continuation of Friday’s momentum is expected to start the week but sustainability of this move is questioned. Momentum can carry things only so far and markets need a upside move out of the Euro and crude to really light any fire so don’t get ahead of yourself with bullish momentum today. The next two weeks could offer a major chop with money flow still the biggest factor into the end of the month.

Spreads to watch include CN12-CZ12 which should continue to tighten in spite of the bullish move. KWH-K is starting to tighten with more bull spread potential as Australian quality tanks. SN12-SX12 showing a 10-cent inverse is questionable with US stocks ample to say the least. I would look for this spread to move to a 10-20 carry in the coming days.

EU Wheat was .75 Euro higher overnight gaining on CME momentum. The trade currently sitting at 178.00 is capped by continual export pressure from Russia and Australia. Reports have China “stockpiling” corn in the NE province of Jilin at about $356.00 (USD converted from 2,245 Yuan) per metric ton. This program is expected to extend through April 2012.  

The “Risk On” trade into year-end has been widely thrown around and is another possible bullish impact heading into the post Christmas week.