Free Commentary

By: Dan Hueber –

After relatively choppy last week, bulls are first out the gate this week with decent strength across the grain/soy sector.  From what I can gather, the buying would appear to be stimulated by continued rains in south American that is potentially hampering not only harvest but compounding transportation difficulties in Brazil and concerns of actual crop damage in Argentina.

While it has yet to be really spoken out loud, most likely due to the early date, but one has to at least begin wondering if the unusual winter weather that we have experienced across the United States is not raising the levels of concern for the trade and hence the need for risk premium to be factored into price.  Massive rains and flooding on the west coast, well above normal temperatures for much of the Midwest with little to no snow accumulation and a lingering drought across the south/southeast.  There would appear to be nothing “normal” about the weather just about anywhere and when you look at the early projections for crop acreage/production they are all predicated on a “normal” year.  By no means may that not be the case but as long as the uncertainty of production risk hangs over us, the need for price risk premium will remain as well.

It is almost time for another supply/demand report and the surveys are rolling in.  Reuters released numbers over the weekend which break down as follows; Corn ending stocks 2.317 billion, compared with last month at 2.320, beans ending stocks at 418 million versus 420 and wheat ending stock at 1.135 billion versus that February estimate of 1.139.  While if correct, none of this would be significant changes, at least psychologically they should lean to the positive side.  For South American production, we have estimates of 105.95 MMT for Brazilian beans and 87.78 MMT of corn.  This compares with last month at 104 and 86.5.  The Argentine estimate came in at 55.2 MMT beans and 36.46 MMT corn versus the February estimate of 55.5 and 36.2. Last but not least, there are global ending stocks with estimates at 218.51 MMT corn, 81.52 MMT beans and 248.62 MMT wheat.  In February, these numbers came in at 217.56, 80.38 and 248.61 respectively.

The combination corn/bean/wheat chart has not quite returned to the highs posted in January or February but the overall picture continues to appear positive and this even without any true weather concern.  As I have commented in previous letters, it appears that we have set the stage for solid advances as we move out into the spring and summer months of this year but still lack the spark to ignite the fire, at least for now.

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