The Grains Review
For the week of June 20th, 2011
Pitguru Matthew Pierce will tell us something new around grain market in the new week.
Coming back from the wet weekend traders have nothing to get excited about concerning agriculture. Demand remains quiet outside a few wheat tenders with macro markets remaining in the drivers seat. No matter how many acres flood here and in China I feel there is no chance of a rally until the world debt situation resolves itself or at minimum takes a breather. There was no major progress achieved over the weekend leaving the Euro in a lurch but there is sentiment that Greece will receive their 12 billion by the middle of July. This is contingent on Greece changing ownership laws allowing foreign capital to own domestic assets. This helped all foreign markets tumble overnight with pressure from a falling crude market helping commodities continue their tumble. Chinese markets were on the defensive the entire session eliminating early momentum with most markets ending in the lower half of the range if not worse.
Looking at weather markets have a multi prong story. The first chapter comes from China with massive flooding, the worst in 20 years, seen in Zhejiang and Hubei provinces. Over 1 million hectares are currently under water with more expected following more rains this week. This is the opposite of the north central plains which missed much needed rains this weekend with no real chance seen this week. Developing corn and beans are under early stress with this a developing story. The EU situation continues to improve after weekend rains but more are needed in the eastern regions to make producers comfortable. In Argentina the Ag Minister lowered their expected wheat acreage by .3 million hectares due to a dry spring. This makes the 4.7 million all the more important. On the domestic side markets have massive amounts of rain expected to hit central and S. LA helping eliminate early stress to rice, corn and beans with 2-4” expected over a continual storm the next 6 straight days. As much as the southern rains are bearish, the continued northern rains are a major and growing problem. Fargo, ND is looking for rains 6 of the next 10 days with 1-3” expected to drop. Rains will ease in central MT offering a late chance to get some crops in there but I have to look for a realistic million acre decline if not dramatically higher for that region with ND looking at about a 1-2 million total loss as well. Couple this to the talked about losses of 10-15 million Canadian acres due to flooding and late plantings and I think traders have a real problem that will not be figured out for weeks yet. Looking at the S. plains I see high winds and chances for tornados in central KS today and into tonight. This will drop some rains but the big system hits late this week with 1-2” expected. This will help stabilize the crop in E. KS but most of the damage has already been done in SW KS and into OK and TX. Overall weather remains a major question mark for me with EU, Russian and E. KS and LA situations improving while ND, IA, MT, MI, MN, WI, MI, OH, KY, TN and Argentina add to the problems in China and Canada.....
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