March 6 Grains Commentary: Joe Vaclavik

This is Joe Vaclavik from CME Group here in Chicago. Soybean market was mixed here on Tuesday, kind of an indecisive trade. In general, the market has trended sharply higher since bottoming in January. We've got some pretty severe weather problems in Argentina, A lot of the soybean crop there has been affected by drought, and an ongoing drought, very very little rain here in the last couple of months. This is one of the driest growing seasons since I believe the early '80s, if not the late '70s. So very very dry in Argentina, and there will be pretty severe production losses there. That is the opinion of most traders. Now Brazil on the other hand is in the process of harvesting what may be a record crop. We may eclipse last year's record in Brazil, in regard to soybean production. We've heard more about Argentina in the headlines, because the market's been up. But if this market starts to sell off, I believe you'll start to hear more about the big crop out of Brazil. Now demand for beans--for U.S. beans in particular, is kind of a question mark here. We know the crush demand is going to be very good, because crush margins have just exploded here recently. We should crush beans in the U.S. at full capacity from now through the end of the marketing year. The question mark here is exports. Exports make up half the demand base, and they've been trailing the pace needed to hit USDA projections by a fairly wide margin. Anybody who's bearish the bean market will point to that statistic, and tell you that exports are really lagging here, and we've got to play catch-up in short order. Remember, we've got a USDA report on Thursday morning. Traders will watch closely for the South American production estimates, and also any changes to the U.S. demand estimates. Again, Joe Vaclavik from CME Group here in Chicago.