THE BIG PICTURE

Corn fundamentals remain constant as we enter next week. Cash prices being offered at U.S. shipping ports to meet export demand remain 40 to 80 cents over March futures, a sign that crop problems in South America have importers turning to the U.S. to fill needs.

The drought in Mexico has also contributed to a wave of exports into Asia. While demand is good, it falls short of great. Asian business accounts for 70% of our annual feed grain exports, yet, big U.S. buyer Japan has purchased record Q1 shipments of European corn, while China only nibbles.

This all goes back to last February, when President Obama told China and other regular U.S. customers, We can't sell you all the grain you want, as we will run out. So, find secondary sources - and they have. This is not a bearish export scenario; it supports current prices ahead of all our planting and growing season uncertainty here, but it keeps carryover stocks stable, preventing rampant price inflation.

Soybean fundamentals, too, are constant, as demand is robust. China is actively buying in the U.S. - we are the world's sole port of origin prior to the Brazilian harvest (which should soon start.)

Current long-term forecasts have the last half of February wet in Brazil's central grain regions, which were planted first. If that comes true, it would lead to harvest delays, keeping U.S. exports solid. The big question to be determined as harvest results come in: will Brazil's historic wet growing season in its central grain regions lead to lower yields?

Wheat fundamentals are changing slightly. U.S. and foreign stocks are huge. Trend following funds which had a record short position two weeks ago have been short covering (buying back some of those positions) to trim risk as European and Russian wheat tries to endure below freezing temperatures. Such cold can trim yields sharply even though the crop is dormant. We hear of 50% losses in some Russian grain areas, which would lead to better U.S. wheat exports the last 20 days. Further, that kind of yield loss sets up potential for a big price increase if Russia decides to protect domestic needs and prices by restricting future exports.

Next week's weather forecast across Europe and Russia calls for more below freezing conditions, further creating production concerns. The seasonal February trading pattern is subject to change with weather actualities, but keep this as a footnote. We always rally ahead of the USDA crop report such as next Thursday's at 7:30 a.m. Central, then break afterwards into month's end before a March-to-June U.S. planting and growing season rally.

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