Agrivisor Morning Marketwatch

Friday, February 12, 2016
***** Grains are mixed to start the day; soybeans 1-2 lower, corn steady/weak, and wheat 3 higher. *****

   # At week’s end, there’s more of a “risk on” attitude in markets with crude oil and equities leading the way higher.  Whether this is new buying, or just end-of-week short covering is hard to discern.  Some markets may be benefiting from Chinese economic activity returning to normal next week after their week long New Year’s celebration. 
   # The oil trade is also wrapping up meetings at the International Petroleum Week, and few voiced any reason for optimism.  Output is still exceeding demand, with few seeing any sign of production curtailment.  Still discussions among various producers continue. Traders are heartened by talk that OPEC is talking with other major producers. The carry in the oil market has gotten so large that it now pays to store oil on supertankers.  
   # The Dollar edged higher, but traders were waiting on today’s economic releases.  Eurozone GDP grew 0.3% in the 4th qtr., at the expected pace.  But the December Ind. Production number came in slightly lower, whereas the trade was looking for slightly higher. Financial traders were somewhat heartened by Fed Chairman Yellen’s comment that the Fed was ready to act should world economic conditions threaten to send activity spiraling lower again.
   # In the grains, the trade is anxiously awaiting to see if Egypt takes wheat on its overnight tender.  The confusion surrounding their tolerance of Ergot has caused the last 2 tenders to be cancelled.  Adding to the mix is the fact Bunge is still waiting to unload a cargo that has been in port for a couple of weeks, one supposedly held up by paperwork.  There are other tenders outstanding too, notably from Jordan and Morocco.
   # It was not lost on the trade this week that the weekly export sale report on Thursday included business with China.  And since that business was transacted, the Dollar has weakened.  General Dollar weakness is expected to possibly help grain export business in general.  Still, soybean business will be flowing to S. America with harvest making supplies more generally available.  Early week data showed Brazil was 10% done.  Weather forecasts are thought to look favorable for them to make good progress. 
   # Malaysian palm oil prices hit their highest level since April 2014 overnight.  Strength came from reports that output dropped unexpectedly last month because of the impact of drought across the region.  The govt. also confirmed it was keeping its crude palm export tax at zero. 
   # Changes in Argentine ag. Policy by the new regime has significantly boosted processing activity.  1st qtr. crush is expected to hit a record this year.  The increase in product available to the world should put pressure on crush margins elsewhere, the U.S. in particular.
   # From a weather perspective, the La Nina debate has taken center stage, with forecasters trying to predict how soon in might come, and what the impacts on weather around the globe this summer might be.  As you can expected, there’s not a lot of agreement, something that could eventually bring more volatility to the grain sector. 
   # The latest weather forecasts show scattered showers continuing across all of Brazil this week, enough to keep maturing crops adequately supplied with moisture, but not so much to significantly impede harvest activity.  Generally, scattered showers will persist in Argentina too.  For both temps seem to be in the normal/slightly warmer category.  In Russia/Ukraine, slightly warmer temps will reduce snow cover, leaving crops somewhat exposed if there’s a late cold wave.

***** Cattle should start slightly lower; lean hogs steady/firm. *****  

   # Wholesale beef is slightly lower; pork prices were lower.  
   # Cattle feedyards have been pricing cattle at lower money this week when it became apparent that soft demand started dragging wholesale prices down.  It’s thought much of the week’s trade though has already been done.  Hog prices should hold better with packers having good margins, but there could be some temporary weakness derived from some plants being down Monday.