An Excerpt from CRB'S Futures Market Service.
CORN
Corn prices rose to a 3-week high but remain within a 4-month-long $1 per bushel range. Bullish factors include (1) the statement from the Rosario Cereals Exchange that corn crop yields in Argentina, the second-largest corn producer, may drop -65% because of drought, (2) tight supplies due to a lack of selling of corn by U.S. farmers to exporters, which boosted the spot-basis bid for corn in the cash market to 77.5 cents above Mar futures, the highest in 5 months, and (3) record U.S. ethanol production of 963,000 barrels a day in the week end Dec 30. Bearish factors include (1) harvest pressures in Brazil, the world's third largest corn producer, after farmers there harvested 6% of the country's corn crop through Jan 27, more than the 2.8% harvested the same time last year, (2) USDA’s Jan 12 hike in its 2011-12 U.S. corn production estimate to 12.358 billion bu. along with the hike in its 2011-12 global corn production estimate to a record 868.06 MMT and the hike in its 2012 global ending stocks estimate to 128.14 MMT, and (3) the +8.2% y/y increase in the 2011 China corn harvest to a record 192 MMT, which may reduce Chinese demand for U.S. corn.
Weekly Corn Exports (week ended Jan 26): 669.6 MT; 2011/12 (Sep-Aug) cumulative exports –2.1% y/y.
Fundamental Outlook—Short-term bullish—Corn prices are correcting higher due to drought in South America and tight domestic supplies. Corn had fallen to a 13-1/4 month low in December after the USDA raised its U.S. and global production and its global ending stocks estimates. Record U.S. ethanol output and tight global supplies are also supportive. The corn 2011-12 stocks/use ratios are very tight with the US at 6.7% and the world at 14.8%.
SOYBEANS
Soybean prices are moving sideways near $12 a bushel, moderately above December’s 1-1/4 yr low. Bullish factors include (1) the drought in South America that prompted researcher Oil World to predict that soybean production this year in Argentina, Brazil, Paraguay and Uruguay will fall to 124 MMT, down -7.9% from last year's 134.7 MMT and that global soybean production may fall to 252.8 MMT this marketing year, down -4.9% y/y and the lowest in 3 years, (2) renewed Chinese demand after China purchased 120,000 MT of U.S. soybeans on Feb 1, and (3) USDA’s Jan 12 cut in its 2012 global soybean production estimate to 257 MMT and the cut in its 2012 global ending stocks estimate to 63.43 MMT. Bearish factors include (1) USDA’s Jan 12 hike in its 2011 U.S. soybean production estimate to 3.056 billion bu. along with the hike in its 2012 U.S. ending stocks estimate to a 5-yr high of 275 million bu. as it cut its U.S. export estimate to 1.275 billion bu, and (2) reduced Chinese soybean demand after Chinese customs data showed China's 2011 soybean imports fell 3.9% to 52.64 MMT, the first annual decline in 7 yrs.
Weekly US soybean exports (week ended Jan 26): 1,169.6 MT; 2011/12 (Sep-Aug) cumulative exports –25.4% y/y.
Fundamental Outlook—Short-term Bullish—Soybean prices are correcting higher due to South American drought concerns. Prices had fallen to a 1-1/4 yr low after the USDA raised its U.S production and ending stocks estimates. Another supportive factors is the tight U.S. 2011-12 stocks/use ratio of 9.1%. Global soybean supplies are adequate with the 2011-12 world stocks/use ratio near average at 24.5%.
WHEAT
Wheat prices surged to a 4-1/4 month high. Bullish factors include (1) concern that excessive dry weather in the winter-wheat growing areas of the U.S will reduce crop yield potential after the USDA’s drought monitor shows conditions from central Kansas southward range from "abnormally dry" to "exceptional" drought, (2) the prediction from researcher UkrAgroConsult that Ukraine's winter wheat harvest may decline to 13 MMT this year, down -42% from 22.4 MMT in 2011 due to drought, and (3) speculation Russia has exported nearly all its available wheat supplies for this year. Bearish factors include (1) USDA’s Jan 12 hike in its 2012 global wheat production estimate to a record 691.5 MMT and the hike in its 2012 global ending stocks estimate to a 12-yr high of 210.02 MMT, (2) the +3.2% y/y increase in U.S. winter wheat plantings to 41.947 mln acres, (3) USDA’s hike in its 2011/12 wheat production estimate for Australia, the world's second-largest wheat exporter, to a record 28.3 MMT and the hike in its 2011/12 Australian wheat export forecast to a record 20 MMT, and (4) Argentina’s higher 2011 wheat exports at a record 11.1 MMT.
Weekly US wheat exports (week ended Jan 26): 454.5 MT; cumulative 2011/12 (June-May) all-wheat exports: -14.5% y/y.
Fundamental Outlook—Short-term Bullish—Wheat prices are moving higher due to drought concerns in Eastern Europe and the U.S. Prices had fallen in Dec after the USDA raised its global production estimate to a record and global ending stocks estimate to a 12-yr high. Record output in Australia and increased exports in South America are also pressuring prices The wheat 2011-12 supply situation is average with the stocks-to-use ratios at 41.2% for the US and at 30.8% globally.
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