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Post-USDA report market tug-of-war ahead

Jeff Caldwell Updated: 11/09/2011 @ 3:08pm Agricultural content creator and marketer.

Outside markets are "getting pummeled" and that has taken away what many expected to be a bullish jolt of energy for the grain markets after USDA released its monthly Crop Production and World Ag Supply and Demand Estimate (WASDE) reports Wednesday morning.

"Well, the air may have been taken out of things a little today," says Derivitaves manager for ICAP Energy LLC and Agriculture.com Market Analyst Scott Shellady. "I think the market wanted something a little more drastic to get us going to the upside."

There were a lot of expectations, at home and abroad, that Wednesday's numbers would provide fuel for a surge in grain prices moving into winter. But, despite lower numbers for corn and soybean yields, as well as slightly tighter ending stocks, traders said the data wasn't enough to outmuscle a group of global factors that has cast a bearish tone over the grains.

"With the outside markets as weak as they are, the sharper higher dollar and the world equity markets being soft and energies being lower, those all probably overshadow this report," says Don Roose, grain trader and analyst with U.S. Commodities in West Des Moines, Iowa. "The risk-off trade around the world is starting to develop again."

Despite early mixed response to the USDA numbers, there are still grain fundamentals at play that could take over these outside bearish factors and inject some life back into the markets. Despite what Roose calls a "bounceback in world production on the grains," there is still a lot of time left for production issues in South America, the region that will be the focal point of production and grain supplies for the coming weeks.

"The ending stocks are just too tight to expect farmers to sell now or on a dip (at least into the winter, barring no melt down in Europe)," says Bryan Doherty, Stewart-Peterson Group Inc. senior market analyst. "South American weather will be monitored closer than ever before."

Reports from Brazil thus far on crop conditions there range from good to drought-stricken depending on the location, sources say. In the southern reaches of the country, in the Parana state, crop conditions are good so far, while further north in the Goias state, farmer Fabricio Rodrigues de Paula says it's a different story.

"We are suffering a hard drought," Rodrigues de Paula says. "It needs to rain this weekend."

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Mike McGinnis South American weather 11/09/2011 @ 2:38pm Great story. And the South American weather is coming into focus for the markets. All reports indicate southern Brazil farmers are seeing favorable weather for a good seed-bed. Argentina doesn't have much to complain about yet either. Considering these two areas will be planting first, before central Brazil and further north, it appears the market is going with the idea that South America's planting season is going well. I wonder if anybody else, especially someone in-country, has a better perspective on SA planting weather?

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