South America's dry weather to sharply improve grains futures

During CBOT's US pit-trade on Friday (Jan 2), if weather forecasts are hot and dry in South America next week, sharp improvements in grains futures will be seen as sidelined money pours in, said US-based analyst Tim Hannagan.

Dry weather in Brazil and Argentina over the past few weeks has slowed down soy planting in these two major producing countries.

Since there are not many fundamental factors driving corn and wheat right now, these grains may follow soy's cues.

Hannagan predicts that more dry weather in South America can put CBOT March soy at US$10.20 per bushel.

CBOT March soy finished US$0.27 higher at US$9.80/bushel on Wednesday (Dec 31).

Analysts said that since demand in China, the world's biggest soy importer continues to be strong, drier weather in South America over January could divert demand to US soy, pushing prices higher.

January is a critical month for grains prices in general, as farmers in the US and elsewhere will be looking at global prices closely for cues on what they should plant next year.