Happy New Year. The first week of price action proved to be volatile, with Continuous Commodity Index futures starting the year making a new all-time high. This could be a signal excitement is ahead for the commodity markets. Next week brings an updated look at the supply and demand situation, along with USDA's final 2005-crop corn and soybean production estimates.
La Nina influences in South America. The continuation of hot and dry conditions in southern Brazil and Argentina are stressing crops as soybeans enter a key period of development. Meanwhile, rains in the big bean areas of Mato Grosso and Parana in Brazil signaled La Nina weather influences are building.
Drought spreads in southern Plains. The latest drought monitor showed drought is intensifying in the southern Plains hard red winter wheat growing areas. The government's near-term forecast calls for below-normal precip to continue in the region, which is causing concern about crop prospects when wheat breaks dormancy.
Fed suggests it's close to ending rate rises. "Views differed on how much further tightening might be required," states notes from the December FOMC meeting released this week. The December notes also said the Fed "would need to be mindful of the lags in the effect of policy firming on the economy." That phrase was added in December and signals the string of Fed rate hikes may be coming to an end soon. But the market is anticipating at least one more rate hike at the Jan. 31 FOMC meeting.
More bird flu cases confirmed. China confirmed a new outbreak of bird flu this week, and a second Turkish teenager has died from bird flu. Authorities will determine what strain of the virus was contracted. Meanwhile in the U.S., participating companies will test each poultry flock on a farm for bird flu to reassure consumers of safety.
The week ahead...
Trend-setting reports. On Thursday, Jan. 12, USDA will release their Annual Crop Production Summary, Quarterly Grain Stocks Report and Winter Wheat Seedings Reports. The key data will provide the markets with plenty of trend-setting data as we head into February.
Weather watch continues. South American weather will continue to be closely watched in the weeks ahead. Crop watchers say soil moisture needs to be recharged in southern Brazil and Argentina to help the crops through the key filling stage.
Beef talks continue. Thailand lifted their ban on U.S. beef recently and meetings with South Korean officials next week are bringing optimism that market will reopen soon. Sources signal resumption of U.S. beef to South Korea is likely by the end of the first quarter this year.
Until next week, keep the optimism for agriculture alive!
