Outlook from the CBOT Floor for February 6, 2012
For the week of February 6, 2012
There are weather concerns in Argentina, Brazil, South Africa, Ukraine and parts of Eastern Europe. The recent snow storm in the central plains has alleviated some early drought talk but we still have issues in the Dakotas and MN. There is little room for error if we want to plant 95 million acres without hammering the national yield. A report came out during the session on Friday from a private analyst stating we (the domestic producer) need to start with yield expectations closer to 155 bpa due to expanded acreage moving into marginal land. I guess “trend line” yields are a thing of the past especially with corn on corn acreage taking a nosedive year after year. Informa came out during the session with lower estimates for all South American production. No shock to the trade but seeing numbers continually falling has helped budding momentum in beans. This is countered by reports from Argentina over the weekend stating recent rains have recharged soil moisture making early production numbers for beans more likely than the recent downside reductions. Western BA province has been the greatest recipient of rains in Argentina while Rio Grande De Sol has seen good rains during the pod filling stage. This could change estimates for the Brazilian crop dramatically so we will have to watch private forecasts heading into the USDA report. The trade is expecting a drop across the board from last month’s production estimates but the question is, how much versus expectations?
On the demand front, the US has a problem. Taiwan which is traditional US customer for both beans and corn skipped us over the weekend. This is a signal of further switches to South American shores due to a quickening harvest pace. AgroConsult stated 6% of the Brazilian crop is harvested versus 5% last year. A lack of major rains over the next week in Mato Grosse looks to pull more interest from US shores especially if coupled to the recent basis rally. The IMF estimates Chinese growth in 2012 at 8.25%. This is versus last year’s early projections approaching 10%. In comparison it may not look that good this year but let’s not kid ourselves, 8.25% growth is phenomenal no matter what some analysts state.