More Worries About South Argentine Dryness

An increasing amount of noise is being heard in grain and soybean markets about ongoing dryness in southern Argentina.  \r\n   Some still say it won’t matter much to the markets because increased corn and soybean production in Brazil, the result of nearly ideal conditions, will balance any losses in parched Argentina.  However, the midday GFS forecast model was drier in southern crop areas of Argentina, and even the most optimistic of traders is taking the forecast a bit more seriously.\r\n   “Worrisome dryness is inching into Buenos Aires,” said AgResource.  â€œElsewhere conditions remain adequate.”\r\n   Confusing the matter a little is the EU model, which maintains a much wetter pattern in Argentina than the GFS model in the 6- to 10-day period, which would be ideal.\r\n   Neither forecasting model projects rain through this week for Argentina, so it will be a while before traders find out if Southern Argentina farmers get needed rains.\r\n   Overnight grain and soybean prices are mixed, with corn lower, wheat slightly lower and soybeans a little higher.  The market seems unwilling to carry the USDA report rally forward, and comments from Ohio State University Economist Matt Roberts Monday illustrate the thinking of many investors.\r\n   Quoted by, Roberts warned farmers, who have seen six “extraordinary years” of profitability with higher prices to brace for dramatically less lucrative conditions over the next five years or so. \r\n   “We already see lower prices, and unless US or South American acreage declines, those prices are likely to continue to move lower,” Roberts said.\r\n   “Prices reflect that we have moved from an era of scarcity to one of adequate inventories, and price have responded by moving lower,” he said.\r\n   Corn also may be pressured by reports of increased farmer selling as post-report higher prices triggered private sell points.  Basis levels were said to be lower in many locations because of the movement.\r\n   And many wheat traders were reluctant to put much store in Egypt’s purchase of US Soft Red Winter wheat or to hold out hope for Brazil to lower its wheat import tax again.\r\n   And Benson Quinn Commodities said many wheat traders have become skittish about picking a bottom in the wheat market after being wrong many times in the recent past.  A large global surplus of wheat likely will prevent a major upswing in prices and allow it to disassociate itself from corn, analysts said.\r\n   Soybeans continue to be supported by stronger-than-expected exports, market analysts said.  Fears of Chinese cancellations hang over the market as the Brazilian harvest gains speed, and fresh purchases have declined, but orders have not been cancelled, and Gulf shipments remain active, prompting projections of tight ending stocks.\r\n   No cash cattle trading was reported in the Plains Monday, nor were there any bids or offers to report.  \r\n   There are some who believe cash cattle prices will be steady to higher again this week after advancing $2 to $3 per cwt last week to record highs.  Feedlot showlists are estimated to be lower in nearly all major feeding states as feedlots try to recoup some of the weight lost to the arctic blast earlier this month.  Packers may have to compete for available cattle to fill kill schedules.\r\n   Cash cattle prices established another record high last week, trading $2 to $3 per cwt higher at $139 to $140 and at $220 to $222 on a dressed basis.  \r\n   The USDA reported higher to sharply higher boxed beef prices Monday as light packer offerings were met by moderate buying interest.  \r\n   Wholesale beef prices also set another new record high Monday.  The USDA’s choice cutout was reported at $216.94 per cwt, up $1.96 on the day and easily eclipsing the previous record on Friday of 214.98.\r\n   The USDA’s select cutout value also set another record high at $214.76 per cwt, $3.18 above the previous record high on Friday of $212.58.\r\n   Many are wondering how high wholesale and retail beef prices can go before consumers switch to pork or chicken, which offer protein at lower cost.  So far, they have been willing to pay up, but prices are in uncharted waters, and some traders are getting antsy.\r\n   The CME Feeder Cattle Index for the seven days ending Friday is $171.20, down $0.40 on the day.  By contrast, the Jan feeder cattle contract settled Monday at $167.82 per cwt, down $0.82.\r\n   Fox News reported this morning that Congressional negotiators unveiled a bipartisan, $1.1 trillion spending bill Monday night that will reverse a 1% cut to cost-of-living increases for disabled veterans and provide $1.525 billion in aid to Egypt, among other provisions.\r\n   The measure fleshes out the details of the budget deal that Congress passed last month; it would fund the government through October, Fox News said. The budget pact gave relatively modest relief to the Pentagon and domestic agencies from the deep budget cuts they would otherwise face.\r\n   The news could give stocks a boost as it avoids a costly Federal Government shutdown.\r\n