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What do we know?

12/02/2010 @ 10:09am

CHICAGO, Illinois (Agriculture.com)--With so many grain market factors floating around, it's hard to follow everything. So, if you are keeping 'score' at home, here are a few things I'm hearing from floor traders and market analysts. 

First, the U.S. Dollar is falling recently, due to gains from the euro based on European countries making efforts to curb their financial crisis. As the euro strengthens, the U.S. Dollar falls. As many know, a falling Dollar is price-positive for grain commodities. However, with so many European countries trying to fight off financial debt problems (Portugual, Ireland, Italy, Greece, Spain), the EU debt crisis future remains in question. 

During these times of world economic uncertainty, the U.S. Dollar is being seen as a safe-haven for investors. So, as the Dollar gets pushed up the grain prices could see continued pressure.

On balance is the grain price-supportive factors of world demand and crop-weather concerns. Argentina is facing an uncertain summer weather pattern. La Nina, a weather phenomenon, is expected to keep the Argentine  crops dry and the northern Brazil crops wet during the all important growing months of December and January.

In addition, heavy rains are keeping the Australian wheat quality lower. The dry U.S. winter wheat concerns continue, market analysts say. Overall, the world wheat weather concerns are underpinning wheat futures prices.

On the demand-side, China continues to buy U.S.  and South America corn and soybeans. Egypt stepped in, recently, and purchased U.S. wheat. This is a positive sign for the U.S. wheat market, floor traders say.

Also, news of China and Argentina teaming up for 2011 corn business should not alarm U.S. corn producers, one grain analyst says. The fact that China is looking to secure 2011 corn needs is a sign that world grain inventories are being drawn down. This signals an increased need for corn in the future, providing longterm price support.

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