June 23, 2011
US grain prices recover; market outlook uncertain
US grains prices posted a recovery in the wake of recent declines which were precipitated by a plethora of concerns ranging from macro economic unease to improving weather, and the ethanol vote in the US Senate last week.
Macro economic factors and external markets are likely to hold sway on price direction in the near term with the next key fundamental data release being next week's USDA Acreage and Quarterly Stocks reports. Corn prices edged up with gains once again led by the new crop December 2011 contract which closed almost 20 cents higher on the day at US$6.80 bushel while the front month July contract closed 7 cents higher on the day at US$7.07 bushel. In contrast the bounce in CBOT wheat was led by the front month contrast with deferred contract posting more modest increases.
Forecasts for a high pressure ridge to move into the US Corn Belt late next week leading to warm and dry weather conditions were supportive for prices raising concerns after a wet and delayed spring planting period. Grains prices have been oversold in our view with sentiment dominated by broader macro concerns and we reiterate our positive view on the grains and corn in particular.
Weather woes remain with concerns over delayed and lower than expected plantings in North America and the impact of a dry spring on European production. Meanwhile US media reported that heavy rains expected late this month across Ukraine's leading grain production areas in southern regions may affect grain harvesting and reduce the crop according to the head of the country s weather forecasting centre.
Separately India's monsoon this year is expected to be just below normal the weather office said in a revised forecast yesterday but could pick up after July 15 during the key planting month for rice sugarcane and corn. India's Meteorological Department said in a statement that this year's monsoon rains would be 95% of the long term average overall down from its April forecast of 98% and just short of the 96-104% range which counts as normal monsoon.
