With the holidays upon us, it seems that optimism is coming to the forefront. Hopes that lending will loosen up after the turn of the year, along with the inauguration of a new president, bring hope of better times coming.
Talk of some funds for reallocation of selling metals and various other commodities in exchange for purchases of agriculture commodities should be good news for the producers of ag goods.
While some areas of Brazil and Argentina have received rainfall in small amounts, more is needed to sustain crops. Heat may abate temporarily, but after the New Year, the trade will be very watchful of crop conditions. Basically, any crop loss in Brazil and Argentina means more export business for the U.S. soy industry and that spells a tightening carry-out. At this time, because of the Chinese government's initiatives to build reserves while also supporting farmer's prices for crops of corn and soybeans, the Chinese crusher can buy and import U.S. soybeans much cheaper than they can purchase domestically.
Basically, Chicago board prices for soybeans can go to $9.80 a bushel before they lose competitiveness. I suspect that the price of corn and soybeans is trying to move back into the upper ranges that were seen before the last decline. Cold winter weather has slowed farmer's ability to move grain via rail, truck or barge. The ethanol industry continues to feel the pinch of margins tightening as ethanol is pushed higher in the face of declining crude and unleaded gasoline prices. With the trade anticipating another decline in prices after the turn of the year, feeders are going hand to mouth just like the rest of the end users. I, too, am looking for a seasonal decline. However, I would caution from becoming too negative quickly after the turn of the year on livestock, it appears to me there is promise on the horizon for cattle. Cattle futures have declined $36.75 basis February.
Watch East Coast weather. It could make or break demand for product. Our plans are in place. With the holidays here, I wish everyone a prosperous New Year.
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The year of 2008 was bi-polar. The New Year should tend to be choppy and something for everyone.
