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U.S.Market Perspectives - January 23, 2015

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  1. Chicago Board of Trade Market News


  Outlook: Corn contracts have remained rather stable compared to the recent price decline in soybeans. This has caused the price ratio between November 2015 soybeans and December 2015 corn to narrow back to levels not seen since March 2014. In other words, market forces seem to be buying back some U.S. corn acreage for this spring.

  It is still too soon in the year for acreage discussion to be a dominant price influencing variable, but that will change going into the month of February. Some degree of weather premium will presumably start to return to corn futures contracts by about the middle of February. The size of that premium and the length of time it endures are entirely dependent upon future conditions that are presently unknown. Currently, the one confident prediction is that market volatility will increase for a time.

  The present strong cash basis in corn markets may not encourage additional buying of corn futures by large speculators, but it could give them some reassurance that there is little reason to reduce the long positions that they are holding. Rather, those speculators will bide their time and wait for more definitive information about the success and size of Brazil’s second corn harvest, potential U.S. corn acreage and developing weather conditions. The reluctance of U.S. farmers to sell indicates that many of them feel that probabilities are favorable for speculators eventually creating a better selling opportunity later this spring.