By: Dan Hueber –
While the corn and wheat markets began to sputter a bit yesterday, beans continued their advance and have followed suit again overnight. Beginning with that fateful morning of January 12th as markets were preparing for the worst from the USDA, March beans have closed higher each day since, gaining nearly 5% in the process and as of yet at least, have shown little sign of exhausting. Of course, the driving force behind this enthusiasm are the ongoing dry conditions in Argentina and the outlook for more of the same. Indeed, in his weekly update, Dr. Cordonnier lowered his projection 1 MMT (52 MMT) and commented that his bias was to witness additional reductions in the weeks ahead. The Buenos Aires Grain Exchange now rates the beans crop just 33% good/excellent. He left his estimate unchanged for Brazil at 111 MMT and stated he has a neutral to higher bias moving forward but also did make mention of a strange occurrence happening in the state of Parana. Conditions have been quite moist there and although the plants appear otherwise healthy, there are numerous reports of pods dropping. Some agronomists have suggested that the soils are so saturated that a lack of oxygen is stressing the plant to the point that healthy looking pods are just dropping off. The wet conditions have also heightened concerns for potential rust and other disease issues in that region.
Do note that the corn market has reacted little to the condition in South America and maybe better stated the Southern Hemisphere thus far. Dr. Cordonnier lowered his estimate for Argentine corn 1 MMT this week and while he left the Brazilian estimate unchanged, he holds a lower bias moving forward. Keep in mind as well, his estimates now for the combined Argentine/Brazilian production stands at 128 MMT, which compares with the current USDA estimate of 137 MMT. Additionally, little has been said about weather in South Africa this year and drought has been plaguing that country as well. In their most recent update, Grains SA, the South African ag consulting group, reported the ongoing dryness has not only hampered crops in the ground but forced a cut in planted acreage. As you can see on this grid, year over year rainfall ranges anywhere from 17.7% less than a year ago to 48.4% behind. Granted, the growing season is not over so the extent of the damage is yet to be known but this could take South Africa out of the corn export market altogether.
We better be careful, or we might even see a positive trend develop in the corn export scene. Last week, we posted the second highest weekly sales number of the marketing year at 1,888,300 MT (74.35 mb) and in the daily system this morning, the USDA reported sales of 256,096 MT (10 mb) were made to unknown destinations.
Finally this morning, I hope you are all sensing the trauma that is being experienced by the global financial and political elite that is currently descending on Davos Switzerland for the annual World Economic Summit. It turns out there is record setting snowfall is coming down on this Swiss mountain resort town and it is currently under a Level 5 avalanche threat. The scale actually runs from 1 to 5, with 5 being the highest. There have already been emergency messages issued that the supply of Beluga Caviar was running dangerously low, the cellar was nearly depleted of Dom Perignon Champagne and the butlers were short staffed and having a very difficult time providing timely service while trying to negotiate the streets wearing snowshoes. Oh,…the suffering that must be occurring there.