Soybean Fundamentals: be aware that the weather forecasts are changing for the good with regards to Brazilian soybean harvest and Argentinean pod fill. Soybeans continue to be supported by higher trending soybean oil, which is following crude oil futures. Funds, which are hedging against food and energy inflation, are most deeply involved with the crude and soybean oils. Reports from Brazil's early harvest returns are discussing record production. The exchange rate between the US Dollar and the Brazil Real shows action continues to be favorable for foreign demand of soybeans, meal, oil and corn coming from Brazil and Argentina pending their harvest and we should start to see demand weaned from the US. More reports out of Brazil suggests with the countries falling currency value that farmers are more aggressive in forward contracting soybeans for the 2008 planting-2009 harvest and locking in their inputs.
Corn Fundamentals: much of the fundamental focus remains on corn as a follower of wheat. Additional developments from South Korea suggest that the recent 50 K tonnes of GMO corn for food purposes will not likely be their last. The dollar differential between higher priced non-GMO versus GMO corn is $1.27/bushel. South Korea says it will continue to buy GMO corn for two reasons. Number one is the lack of non-GMO and corn supply in general from neighboring China. The second reason is that it is just more economical. South Korea is attempting to tame its food inflation and making an economic decision for its consumers. GMO soybeans may be the next purchase for the country's food pantry. It appears with constricting sources of non-GMO and GMO corn, end users such as South Korea may have to sacrifice want versus need.
Wheat Fundamentals: the media is growing much more interested in the extremes in futures volatility. These include no limits on the spot March futures, expanded and multiplier limits on other contact months, maintenance and initial margin requirements that are increasing, accompanied by tightening old crop international stocks. Along with a handful of international suppliers restricting their exports to tame their own domestic food inflation problems. Reports from the open outcry pit, independent traders suggest their interest in handling buy or sell orders are decreasing as they simply do not want the associated risk in these thin volume, extremely choppy markets. The question must be asked, are these volatile markets actually doing more harm than good for trade volume and liquidity?
By mid to late March, new crop wheat harvest begins for Mexico, Saudi Arabia, Turkey, and Pakistan. All but one of the countries wheat productions is estimated to be at or above last year's production. Production for this year compared to last year are India's wheat production is estimated at 74.89 million tonnes versus 69.35 MT, Mexico at 3.4 MT compared to 3.24 MT, Pakistan at 23 MT versus 21.7 MT, Saudi Arabia unchanged at 2.67 MT and Turkey at 15.5 MT compared to the previous years 17.5 MT figure. These may exemplify the very earliest signs of the 2008 world recovery in wheat production as a result of better weather and more attractive prices for farmers. In a late breaking story today, it is rumored that a trader was trading in the wheat futures market Wednesday in his personal account and substantially exceeded his authorized trading limit. The brokerage firm he was affiliated with will take a $141.5 million dollar loss because of his actions. If you would like to know more about this development, please call Allendale at 1-800-262-7538.
|
|
|