Last week we looked at the tendency of the Christmas season to bring us “thin,” poorly traded sessions on the Chicago Board of Trade. This week we look with optimism to see if the new year can bring us a better market.
We have dug a big hole with prices lately, so we are looking for market movers to improve matters. This morning, Jan. 3, we see little to help us except the rebound factor.
Prices have been pressed lower, so we have reason to bounce. In the outside markets, we have higher crude prices, higher dollar ratios, lack of export news as features of a poor market.
The oil is now at $55.24 per barrel, the highest in 18 months. You have seen gasoline prices creeping up, from below $2 to more than $2.30. The comparable creep in diesel fuel translates to higher transportation and production costs for all grain.
The dollar has crept up to be worth more than the Euro as their problems are on the news every day while our news is about the higher Dow and the flush of consumer optimism with the new president coming in.
The export news has be non-existent. CHS Hedging noted Friday that “there were zero daily export announcements this week.”
We need export news to confirm the large USDA expectations for export. They anticipate a record large yearly export in soybeans, and the second largest corn exports ever.
To not meet these expectations would be critical for prices. South American weather weighs in with mixed implications. One to two inches of rain over the weekend in Argentina is positive for the crop already planted, but they are still putting in the last five or ten percent of the crop, and that is being delayed.
Northern Brazil, where the beans are already flowering, has rain in the forecast. That is positive for their crop.
Then, we have political news. Argentina is cutting its export tax by a half of a percent a month for two years. That starts a year from now, and will also apply to soy products.
The tax is now 27 percent, and represents a higher price to the buyer in other countries. Cutting the tax makes their beans cheaper and more competitive. The best we can say is that the start is a year away. That gets us to the regular winter sport of killing off the wheat crop in the world.
Our Midwest is expected to drop from the 50s today to temperatures 8 to 16 degrees below normal.
That would have impact on the wheat if not for the snow cover expected for the Plains. The Midwest would normally have some snow cover. Ukraine is worried about winter kill, with colder temperatures there the end of the week.
The cold catches them without their snow coat on. I would get worried about their crop, good for our prices, except this is Ukraine, this is winter, and this is what we always talk about this time of year.
Our own wheat has no snow cover after warm weather and rain overnight. The last vestige of Ashtabula weather right now is the remains of ice trails in my drive. Winter returns tomorrow, and we can hope that we get some snow with it.
Prices have been soft, with soybeans giving up 77 cents in a month, and corn 12 cents off the high, which came as a 25-cent rally. Wheat prices made a contract low at $3.93 March futures on the first of December, bounced to $4.20 3/4 in two weeks, then dropped back to the low at $3.92 3/4 on Dec. 23.
A quick bounce to $4.11 on Dec. 27 did not last, but we are currently (Tuesday morning) at $4.09 1/4.