Commodities update
The wetter pattern from the Plains through much of the sooutheastern US should alleviate some of the trader’s fears about drought eroding the potential for the wheat crop, so some of the weather support should start to erode from sugar futures this week. WTI sees a favorable rainfall patten for the next two weeks, followed by a little dryness. By mid December, however, the dryness will not be as much of a problem with much of the crop being dormant. Additionally, the market is trading on crop reports issued on 20 Nov, and the moisture situation has improved in the wheat belt since that time. The weather outlook for wheat should take some of the pressure off of prices into January. That being said, weather is not the only price driver in the grains complex, especially now as we are in a period of high speculative activity. Demand for US is increasing, lead by purchases from South Korea and Egypt, while India is seeing increased tenders for their own wheat and beans. Much of this week’s weather pattern will be trumped by trading activity in energy, as this has driven much of the trading activity across the commodity spectrum over the last two weeks. We will likely see a short term softening of demand in the energy sector, but this will be a short lived break. While oil is now hovering around $90, an extended streak of cooler temperatures will move back in for December, once again providing price support.
