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It's a weather market

06/22/2012 @ 7:04am

It’s also a market that is affected by the overall economy.  So, Thursday's red arrows in the stock market and the metals markets, bank downgrades by a leading ratings firm, a sharply higher dollar and rainfall make for red arrows all around the agricultural markets.

The rain in the western Corn Belt was more than expected in some areas, but rainfall rapidly diminished as the system moved east and was non-existent east of the Mississippi.  Today, the system is regenerating in Illinois but amounts are very light so far.  Raindrops on LaSalle Street, however, made it hard to pay attention to forecasts of very limited rainfall for the next 10 days.  Plus, there are no forecasts of widespread extreme heat, except in the southwest growing areas.

On the other hand, it is hard for traders to ignore the many signs of a slowing economy.  The market was not happy with the weekly jobless claims number, some disappointing earnings estimates, very weak gold and silver markets, weak energy prices, etc.  Often, corn, soybeans and wheat get lumped into the general “commodities” basket, so the influence of the outside markets was also overwhelming today.      

South American Comment

Very high Brazilian basis levels make their soybeans much more expensive than US beans.  Therefore, for all practical purposes, the Brazilians are out of the market until the spring of 2013, when they will have new crop available.  Their export sales have been so aggressive that today’s rumor is that they may need to import beans from Argentina.  This begs the question--does Argentina have any beans to sell?  Their crop was also sharply reduced by drought and so much of their crop goes to the crushing industry.  So it’s back to the U.S. as the main supplier, only do we have any old crop beans to sell?      

The risk of loss in trading commodities can be substantial.  You should therefore carefully consider whether such trading is suitable for you in light of your financial situation.

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