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Multiple important market factors

12/08/2011 @ 4:10pm

The recent pattern of trade suggests the market is pre-occupied with the overseas markets, primarily Europe, during the overnight trading session.  When the ag markets re-open at 9:30 a.m., sometimes it is more of the same.  But recently, there have been days when the agricultural markets have been able to trade on their own fundamentals during the day.  

Corn, for example, responded today to improved export sales and an additional cargo of corn sold to China.  Soybean sales were also a little better than expected.  In South America, dryness has started to be a concern in southern areas—Argentina, Rio Grande do Sul and Parana.  This looks like a typical La Nina weather pattern.  This has caused soy futures to be slightly firmer this week.  

Also, this morning Conab (Brazil) estimated the Brazilian soy crop at only 71.3 mmt. This is small, although Conab is probably being conservative.  Other estimates are around 75 mmt.    

Tomorrow’s USDA supply/demand reports should not be too exciting. There will be no new crop estimates for the U.S.  Changes will no doubt be made to some foreign crops.  Supply/demand numbers may also be adjusted.  

The most obvious adjustment should be the reduction of US soybean exports.  Currently, sales are running 400 million bushels behind year-ago numbers.  While the USDA has factored in some reduction, they have not gone far enough.  

Other changes may wait until January.  That’s when the market will deal with the motherlode of data—grains stocks, final crop production and supply/demand tables based on all the new data. 

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 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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