Are market bears lurking?
The USDA Ag Outlook numbers were bearish as expected, and it's likely that more bad news will be found later this month.
In the March 30 Planting Intentions Report, it's likely the bearish factor of prevented planting ground from last year (10+ million acres) will appear.
But for now, the market is intently focused on the South America production problems in Argentina and Brazil. Private analysts continue to drop their production forecasts, which has forced prices higher (especially for soybeans). Both corn and soybeans have penetrated above resistance marks. So, the technicians will be buying this rally in the near term. For a time, it might work, too, as the next update on SAM production won't be until March 9 - the monthly USDA report. So speculation can run wild about how much damage was done by the January drought in southern Brazil and Argentina. Weather has improved the past few weeks in SAM, with normal rainfall occurring, with regularity, in this previously drought-affected area for the past four weeks. That should have stopped the decline of crops from this area. But, undoubtedly there was irreversible damage from the January drought. We are at the beginning stages of corn harvest in SAM. So far, yields have been disappointing.
Weather has also continued to improve in the U.S., with the previously drought-affected HRW wheat crop continuing to show improvement in the past few months. Crop conditions are now much better than last year's drought-affected crop, even though we entered freeze up in the same dire condition as 2010/11 crop. But steady rainfall (especially in the central and eastern HRW wheat belt) have steadily improved crop conditions throughout the winter. The mild winter also has been beneficial, and growers are back to grazing some wheat, since conditions have improved so much.
Previously dry MN also has received plentiful precip amounts the past week, helping to ease drought concerns there. Europe also finally warmed up from the bitter cold of Jan/early Feb., and now temps are back to about normal for most of Europe. Questions remain about the amount of damage that occurred to the winter wheat crop, with early estimates saying that 50% of Ukraine winter wheat would need to be replanted. Now, those estimates have dropped to 30% or less, and continue to be falling. It might not be all that bullish, either, for the winter wheat to suffer some freeze damage. Instead of leaving it to winter wheat, the poor fields might be destroyed and planted to corn - a commodity in more demand on the world stage right now. Wheat after all is already plentiful, while corn supplies are somewhat limited. Perhaps more corn and less wheat is needed?