There was not a lot of good news in last week’s USDA’s report. No reduction in US carry over and an increase in South American production kept prices under pressure on Thursday and Friday. Bower says this big crop will pressure the markets for the next several weeks, “The USDA estimate of Brazil soybean production at 108 MMT is at the high end of market expectations. In fact since the report there has been a lot of chatter that the number could be even higher. This is going to keep the market under pressure.”
Meanwhile here at home, there is continued concern about the hard red winter wheat crop. Bower says the crop is running about 3 months ahead of schedule, “What that means is that we still have some cold weather to come; and, if there would be a frost or freeze, it would do considerable damage because this crop is so advanced.” With wheat acreage at a very low level, extreme market volatility is a concern.
We also saw some good economic news coming out of China and several other nations last week. Bower thinks this will lead to continued good demand for commodities in the months to come, “Hopefully this week in the USDA report we can get all the native numbers from last week dialed into the market and begin to focus on the demand side worldwide.” In general, commodities are becoming more and more a “value” trade as it appears to some we are in the beginning stage of a global REFLATION as evidenced by the recent PPI numbers in China. “Chinese PPI was up a whopping 7.8% in February, and remember they are the largest group of ‘consumers’ on the planet as they constantly are in search of ‘value.'”
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