Corn Rejection?
Interesting to see corn rallied on Wednesday and Friday's low volume holiday related trade but broke when a chance at more normal volume was seen. We will not discount the fact this market is still trying to be bullish. We have legitimate concerns about dry Argentina. There is also the need for more corn acres this spring when most farmers are thinking of planting less. We can also point out that a lower US dollar will mean better exports. That is a good story but so far we have not seen corn export sales rebound at all. We still are not close to meeting USDA's export expectations and still hear talk of slowdowns and plant closures on the ethanol side.
Soybeans
Like corn, there is a good chance the reversal in the soybeans today was a little profit taking as well as dollar switching from lower to higher. We have to remind ourselves Argentina is almost as large of a soybean producer as Brazil. USDA has Argentina producing 50.5 million metric tonnes (MMT) and Brazil at 59 mmt of soybeans. That 50.5 mmt will likely be reduced in the coming months. China has been buying from us at an extended pace this year. If Argentina dryness continues China may not switch over to South America as dramatic as they usually do in February and March. Having said this good news tomorrow's trade will likely be entered more on the US dollar.
Winter Wheat
Pakistan gave us a nice Christmas gift with their tender for 250,000 tonnes (9 million bushels) of US wheat. We do have to note they are seeking US product under the easy payment plan we are offering rather than price. For now, this market is still ramped up by the 50 million bushels foreign countries are seeking to buy right now. See the Export Demand page of this report. There is one concern to note though. We still have concerns over how much of that business will go to the US. As with corn and soybeans it appears we watching the US dollar for short term direction. Watch the dollar. If it rallies, expect a corrective sell off. IF the dollar remains soft, buy wheat...Rich Nelson
Rich Nelson is the Director of Research at Allendale, Inc. in McHenry, IL. Allendale is registered with the CFTC and NFA and is a member of the NIBA. www.allendale-inc.com
