Weekly Update for January 23, 2012 - Monday, 23 January 2012

WEEKLY UPDATE for January 23rd, 2012

Today producers must pay attention to world news and weather more than ever before.  Knowing what situations around the globe play a role in our prices can help you make informed marketing decisions instead of marketing based on over-reacting to the day to day market price.

The U.S. dollar dropped over 100 points last week lending support to the grain market. On January 12th the USDA crop report brought on limit lower prices which also made our products cheaper and more competitive in the world marketplace.  Many speculators also recognize the end of January as a favorable time when seasonal lows are generally in and investors like to take long positions.

Technically we are seeing a narrow basis, on average $.15 at many locations where basis typically run a range of $.30-.35!   We also have a low supply of corn on-hand; currently we have 283 million less bushels on hand than just 1 year ago.  Knowing this we would expect prices to be higher than this period last year, when in fact the price is about $.40 lower.

Several regions in South America saw disappointing rains over the last several days although the forecasts show more favorable chances of measurable rain.  The soybeans are suffering but some believe that there is still potential for a slight improvement in soybean yields but crucial periods in corn development have passed and there is little optimism surrounding any benefit the corn yield will see from these rains.  The real benefit of these rains for farmers may be the ability to double crop, a measure that would add soybeans to the world supply.

Bearish analysis point out that we are expecting quiet exports to China this week in observance of the Chinese New Year and the EU is experiencing more financial difficulties with Greece and financial leaders are meeting now to determine what the best course of action to take is to resolve this situation.  The USDA is predicting 94-95 million acres will be planted next year, keep in mind though that  regardless of “intended” acres the weather we see this spring will play an instrumental role in how many of those acres actually get planted.  Right now La Niño continues to dominate the weather but there are some signs that by late spring we might see a shift to an El Niño pattern which would bring more moderate temperatures and rainfall amounts.

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