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Grains close sharply higher

03/03/2011 @ 9:41am

CHICAGO, Illinois (Agriculture.com)--The CME Group grain markets staged an impressive rally Thursday, sparked by strong export sales, a lower trading dollar, and harvest delays in South America, analysts say.

The May corn futures settled 15 1/4 cents higher at $7.36 3/4. The May soybean contract closed 17 3/4 cents higher at $14.12.  The May wheat futures settled 12 1/4 cents higher at $8.23 1/2. The May soymeal futures settled $8.10 higher per short ton at $372.50. The May soyoil futures ended $0.03 lower at $58.77.
In the outside markets, the NYMEX crude oil is $0.33 per barrel lower, the dollar is lower, and the Dow Jones Industrials are up 204 points.

"Good exports underpinned the rally," one CME Group floor trader says. I'm a little concerned about the ethanal grind. Five weeks in a row of a smaller grind. Some analysts caution of taking the corn usage for ethanol down 100 million bushels. Overall, a good close today, but painted the tape with Moc buying. I guess they want to test $7.44, last Sunday night's high."

Sue Mortensen, Ag Advantage analyst, says today's rally, had a lot of different things going on.
First, there are a few logistics issues.  

"There are river transportation troubles along the Ohio River Valley.  There are some strikes by workers at the Rosario port in Argentina.  The rain in Brazil has slowed harvest. They are slower than last year in loading out beans," Mortensen says.
There are a few weather issues, she says. "The weather in the hard red winter wheat belt is dry (Kansas, OK, TX).  Forecast rain is not much and is farther north than in previous days.  There hasn't been any rain in Argentina for awhile.  This could be a concern for second crop soybeans (first crop saved by rains in Feb).  Plus don't forget the rain in Brazil."
Then, there are demand issues.  

"For example, soybean and corn sales were decent/large.  There seems to be end user pricing on any dips that the market gives us (whether it is a 2-3 day dip or a one hour dip).  Our crops are competitively priced--for example, beans to China from the PNW are competitive with beans from Brazil.  Ethanol blenders are making huge money," Mortensen says.
Ethanol producers have seen their margins improve.  "There is more discussion regarding increased production of biodiesel--the improvement in energy prices has made this more attractive.  Plus, one way or another, production must increase to meet the RFS2 mandate."

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