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Markets readjust

01/17/2013 @ 4:29pm

The prevailing theme in the ag markets is still the attitude and price adjustment necessary after last week’s reports. The market has gone from obsession about abundant new crop supplies (not yet planted!) to a renewed concern about overly tight old crop supplies. Sure enough, the January reports delivered a surprise!

  

It was painfully obvious in the corn that the stocks number was a surprise. In the aftermath, all the analysts ramped up their feed number -- some more than the USDA.  Lower exports will solve some of the tight supply issue, but still it looks like ethanol needs to cut back more, and the market will be very dependent on early corn harvest in August. 

 

The soybean market also is dealing with renewed worry about tight stocks and the continued fast pace of exports. Concern continues about the ability of Brazil to adequately supply the world export market with new crop beans. The January report, however, also seems to have reignited discussion about how prices need to insure that the U.S. has enough beans for the last six months of the crop year. Realistically, if there are too many out the door on March 1, the U.S. could end up importing beans from Brazil in the summer.

  

The soybean market is also acting more and more like a weather market. Right now, there is a stretch of dry weather in Argentina and the question becomes “how long will this last?” It is more crucial for corn than beans right now with grain fill happening. Whatever the growth stage is, both the corn and bean futures react to each weather update. Late Thursday morning for example, the forecast was slightly wetter, and the market sold off. 

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