Bird Flu Returns and Market News - Tuesday, 19 January 2016

The grain markets are searching for fresh news to help give support to prices.  The fact that we currently are, and have been for quite some time, one of the highest priced sources globally for corn and soybeans is a big stumbling block to a sustainable price recovery.  In addition harvest season in South America has arrived which is also adding to the stress on prices. 

The Funds are holding a substantial number of short positions in commodities right now with record short contracts for corn and wheat.  Some analysts feel that this fact alone has the ability to possibly trigger a market rally, in order for this to occur we need the Funds to not only cover these short positions but also continue to buy, it also could simply limit fresh selling.  There have also been reports that the Funds may exit the commodity markets for the foreseeable future, this could also limit price potential during that time.  Below is a list of more information effecting the grain markets:

Bullish

  • Soybean demand remains strong, Chinese imported a record 9.12 mmt. of soybeans in December.
  • U.S. soybean crush up 15 mbu from last year.
  • Oil content in soybeans higher than last year.
  • The Dollar has weakened slightly.
  • Record short contracts in grains.

Bearish

  • Corn from Argentina is $0.21 cheaper than corn from the U.S.
  • Since 2012 CRP acres have dropped by 6 million acres.
  • Japan has only booked 60% of normal soybean purchases.
  • Land values continue to slip.
  • Grain users are finding lower margins.
  • Ethanol profits are evaporating as the price of crude oil moves lower and the trend in oil prices is not expected to reverse any time soon.

The return of the Bird Flu in the U.S. was confirmed on Sunday, January 17th.  The new strain was found on an Indiana turkey farm.  Nine additional outbreaks in southwestern Indiana flocks have also been confirmed, this strain is not believed to be related to those identified in the Upper Midwest in 2015.  South Korea has halted all poultry imports not treated with heat from the U.S. as a result of these new cases.  The previous ban of poultry imports from the U.S. due to the 2015 outbreak was just recently lifted on November 19th.

 

Recent forecasts are indicating that the arctic cold from this past weekend should gradually be replaced by milder temps by this weekend in the Plains, Mississippi Valley and Great Lakes regions.  The National Weather Service 6-10 day outlook calls for above normal temperatures for the entire country with the exception of Florida where below normal temps are forecasted.  The countries mid-section is expected to receive below normal precipitation while the Pacific Northwest and East Coast are looking for above normal precipitation.

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