December 19, 2010 / 4:40 PM / 7 years ago

Grains Week Ahead - Short but volatile week on weather fears

 * Global crop weather remains in focus
 * High temperatures forecast for Argentina
 * Ten percent Argentine corn crop pollinated
 * Trading seen volatile at year's end
 By K.T. Arasu
 CHICAGO, Dec 19 (Reuters) - It will be a holiday-shortened
week but U.S. grain markets are not expected to be any less
volatile on continued concerns over global weather damaging
crops and as traders try to squeeze out profits at year's end.
 Markets will be closed on Friday, Christmas Eve. But the
preceding four days will see traders focusing on dry weather in
Argentina as the corn crop pollinates and on the pace of
harvest in rain-soaked eastern Australia.
 Add to that investors seeking to close their books on a
high note, with corn futures Cc1 at the Chicago Board of
Trade surging 44 percent so far this year, soybeans Sc1
rising 25 percent and wheat Wc1 rallying 39 percent.
 CBOT wheat is on track to post its first yearly gain in
three years after dropping 42 percent the past two years,
helped by a drought which decimated the Russian crop and halted
exports and rains which reduced the quality of Australian
 Corn and soybean futures are closing in on their second
straight year of gains.
 "It could be anything but a quiet week," said grains
analyst Dan Cekander of Newedge USA in Chicago.
 "There could be upside pressure from a supply-demand
standpoint," he said, adding that hot weather was forecast in
Argentina from the middle of next week.
 The corn crop in Argentina, the world's second largest
exporter of the grain after the United States, has begun the
pollination stage of development, a critical period when
weather can boost or crimp yields.
 "This is a critical time for corn (in Argentina). Rainfall
last was scattered and crops in areas that did not get rains
are in various stages of moisture stress," said agronomist
Michael Cordonnier who runs the Soybean and Corn Advisor
consultancy in the Chicago suburb of Hinsdale, Illinois.
 He said 10 percent of the Argentine corn crop had
pollinated, 30 percent was in the process of pollinating and 50
percent was set to begin the process in about two weeks.
 Eastern Australian weather will also be a trading factor,
with analysts saying that further rains could turn more of the
country's milling quality wheat into livestock fodder.
 "It can get worse if it keeps raining on top of what the
crop has gone through so far," said grains analyst Charlie
Sernatinger of ABN Amro in Chicago.
 He said about 30 percent of the Australian wheat crop had
already been harvested before excessive rains began pummeling
the crop, adding that this wheat would be used for exports.
 Traders said Japan last week bought its first cargo of
Australian wheat in about a month.
 Corn futures are expected to be underpinned by Congress
extending an ethanol tax credit and the tariff on ethanol
imports for another year. They were signed into law by U.S.
President Barack Obama on Friday as part of a tax bill.
 Corn will also be supported by Informa Economics, a leading
private crop forecaster, cutting its estimate of the area to be
planted with corn in the United States this spring by 2.4
million acres from its previous outlook to 90.755 million.
 The company revised its forecast of soybean acres to 77.565
million from 75.8 million in November.
 "These are preliminary numbers, but it shows corn and beans
facing competition from other grains for acres," said analyst
Don Roose of U.S. Commodities in West Des Moines, Iowa.
 He also said the weather in Argentina remains a market
focus. "Argentine weather has been put on the front burner as
the crop goes through pollination. There's hot weather starting
Wednesday and stretching into the following Wednesday."
 Settlement prices for CBOT grains and oilseed complex:
                          LAST      NET    PCT     YTD
                                    CHG    CHG     CHG
CBOT corn       Cc1      596.50     9.00   1.5%   43.9%
CBOT soy        Sc1     1298.75     9.75   0.8%   24.9%
CBOT meal       SMc1     347.80     4.00   1.2%   10.8%
CBOT soyoil     BOc1      54.13     0.06   0.1%   34.2%
CBOT wheat      Wc1      756.75     7.00   0.9%   39.8%
 (Additional reporting by Julie Ingwersen; editing by Jim
Marshall and Diane Craft)

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