January 26, 2012

US crop market closes higher on weak dollar

Dollar index weakness, strength in the cash market and continued issues on a smaller-than-expected corn crop in Argentina due to dry weather made corn futures closed solidly higher on Monday (Jan 23).

Weekend rainfall was disappointing in key corn growing regions in Argentina. The Agriculture Minister lowered its crop estimate to 23 million tonnes from early expectations of up to 30 million tonnes. March ended US$0.085 higher at US$6.20 and May was US$0.09 higher at US$6.25.

Soy futures traded sharply higher on Monday. Weather concerns for the soy crop in South America and weakness in the dollar pushed prices higher. Weekend rainfall was disappointing in key soy growing regions in Argentina and forecasts call for stressful crop conditions to return to southern Brazil. The agriculture ministry in Argentina cut its soy production forecast to 48.9 million tonnes from 52 million to 53 million last month. March closed US$0.35 higher at US$12.17 and May was US$0.30 higher at US$12.25. 

Wheat futures were higher on Monday. The market was supported by weakness in the dollar index and spill over support from corn and soy. Short-covering was also a factor following the break in prices after the USDA reports earlier this month. However, gains were limited by bearish global supplies and demand fundamentals. World wheat supplies remain abundant. CBOT March was US$0.0925 higher at US$6.19, KCBT March ended US$0.065 higher at US$6.73 and MGE March closed US$0.045 higher at US$8.03.

Cattle futures closed higher on Monday. The nearby contract is at a discount to the cash market last week, but gains were limited by concern that current prices are unsustainable given the poor processing margins for packers. The Cattle on Feed report Friday afternoon was near trade expectations. Placements were 94% of year ago, but cattle on feed are still up 3% compared to last year. February ended US$0.05 higher at US$124.60 and April was US$0.45 higher at US$128.18.

Lean hog futures were strongly higher on Monday. The market was supported by pork cut out values being up US$0.87 on Friday and the steady to firm tone in the cash market. USDA reported pork in storage as of the end of December at 475.8 million pounds. Traders were expecting a small increase, but instead stocks fell 3.3 million pounds from the previous month. February closed US$1.15 higher at US$86.48 and April was US$1.45 higher at US$88.50.