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CBOT weekly outlook: Argentine flood fears underpin corn, soy

CNS Canada — Weather concerns in South America continue to dominate the attention of many traders, despite the fact growing conditions for corn and soybeans have generally been favourable in Brazil over the past week.

“It’s been good in Brazil but Argentina has had issues with flooding,” said Ted Seifried of Zaner Group in Chicago. “There are concerns that heavier rains might bring that back for Argentina.”

He explains investors are concerned there could be a repeat of last year when late-season issues in both Brazil and Argentina curtailed production in the final stages of the season.

“So the market is still very slow to give up on South American weather at this point because of what happened last year. We all remember that very well,” he explained.

Corn futures on the Chicago Board of Trade reaped gains during the week ended Wednesday, with the March contract ending eight cents per bushel higher (all figures US$).

“We’ve had a nice uptrend in corn,” said Seifried. “I would say $3.70 (per bushel) is the psychological support.”

However, he cautions the market could move lower.

“Somewhere in the mid-$3.60’s is where I think corn can go,” he added.

Terry Reilly, senior commodity analyst at Futures International in Chicago, said corn has the chance to gain on soybeans prior to the U.S. Department of Agriculture’s next prospective planting report, due out March 31.

Corn “is fighting for acreage and I look for a wide $3.70-$4 range in the May corn contract,” he said.

As for soybeans, Seifried sees major chart support for the nearby contract at $10.36 per bushel.

“The thought process there is at the moment we’re expecting a big shift from corn and wheat acres over to soybean acres,” he said. “Soybean prices are trading quite a bit better than they were at this time last year.”

Both the March and May contracts eked out gains of 2.5 cents over the week.

Seifried adds the next 13 days will be an important time for soybeans as the month of February is crucial for crop insurance calculations.

“The average February price is used to set crop insurance levels so we’ll be watching that,” he noted.

Another rumour making the rounds is that more Brazilian producers may decide to store some of their crop rather than take it to market once it’s ready. Seifried isn’t sure if that will happen, but believes it has helped to underpin current prices.

“That could mean more demand for U.S. exports and possibly lower the U.S. carryover,” he said. “I think that’s part of the reason why you’re finding a little bit of strength today.”

The May contract could see a lot of volatility in the coming weeks and swing around in a wide trading range of $10.20-$10.90, Reilly said.

— Dave Sims writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting. Follow CNS Canada at @CNSCanada on Twitter.

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