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Grains are Weak to Begin the New Year

S&P futures plunge lower

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Grains were weaker to begin the New Year with beans leading to the downside, falling below $8.60 for the first time in two weeks. In outside markets, S&P futures plunged lower giving up nearly 1.5% on the heels of a 7% drawdown in Chinese stocks and the US dollar fell by 0.5%. Crude oil was up slightly trying to bounce off of its recent lows.

Weather in Brazil was mostly favorable over the long holiday weekend and some areas of Northern Brazil received rains. However, the driest areas are expected to get the most rain in the coming days to weeks. The precipitation will be sufficient in the north through Friday of this week to improve topsoil moisture in most crop areas and to reduce concern over further declines in production potential.

In wheat, there was a cold snap over the weekend in parts of Russia and Ukraine with temperatures falling below zero Fahrenheit, but most areas of the wheat belt had at least some partial snow cover to insulate against crop damage. Overnight, buyers seemed eager to find wheat with three different wheat tenders announced: Ethiopia tendering for 70,000 MT, Taiwan Flour Millers tendering for 88,750 MT of US wheat and South Korea's largest feed-maker tendering to purchase up to 60,000 MT of feed wheat.

In South Africa, drought-stricken corn growing areas saw some modest rains over the holiday with localized amounts reaching 0.5 inches. However, the overall drought conditions seem unlikely to reverse course and odds are high that this year’s production will be seriously slashed because of severe drought. In other news, India will soon ask state-run traders to import 0.5 MMT of corn after a second straight drought cut output, in what would be the country's first overseas purchase in 16 years, two government sources said on Thursday. India has agreed to allow state-run traders such as PEC Ltd to import corn to curb rising prices and avoid shortages, said a government official directly involved in the decision-making process.

Stocks crumbled around the world, with emerging markets falling the most since August, as slowing manufacturing triggered a sell-off that halted equity trading in Shanghai. The Shanghai Index lost 6.9% overnight. The Caixin factory index for China came in at 48.2 in December, missing the median analyst estimate of 48.9 in a Bloomberg survey, after the nation’s first official economic report of 2016 on Jan. 1 signaled manufacturing weakened for a fifth month, the longest such streak since 2009.

The risk of trading futures, hedging, and speculating can be substantial. Grain Hedge is a dba of Foremost Trading LLC (NFA ID: 0307930)

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