Middle East Unrest May Push Grains Higher

A higher to sharply higher start is expected this am, barring a sharp sell off in crude oil. Grain prices jumped overnight following the big rally in crude oil due to Middle Eastern fighting. The sharply lower $ overnight and this am is also expected to lend support to the grain market. Dalian, China grain futures were sharply higher today. The three pillars of Friday's rally, South American dry weather worries, higher outside markets, and very bullish chart patterns, remain intact this am and they are likely to propel grains sharply higher again today, as they did overnight.

China's agriculture minister said China will harvest a record grain crop again this year, about 528.5 million tonnes vs 510 million in 2007. Pakistan will supposely be in Jan 10 for 250,000 tonnes of US white wheat.

Isolated weekend rain fell in Cordoba, one of Argentina's 3 main grain growing provinces. Scattered rain is forecast Tue-Wed, up to .6" before dry weather returns Thur-Sun with very high temps forecast this coming weekend. Brazil continues to fare better than Argentina with up to 1.5" of beneficial rain in Mato Grasso over the weekend although dry weather was the rule elsewhere. It will be mostly dry today and tomorrow but rain is forecast in Parana state Wed-Fri. Dry weather is forecast most of this week in southern Brazil, Rio Grande state, increasing stress on beans there. Overall, Brazilian weather is favorable in the north, less so in the south, especially Rio Grande while Argentine weather is relatively poor, too hot and dry. The longer it stays this way, the more bullish an influence it becomes for the US grain market, especially corn and beans.

There is little threat of winter kill (damage from freezing temps) in the midwest or southwest the next week or longer despite the lack of snowcover to protect the dormant wheat crop.

Keep watching the outside markets and South American weather for direction today. I would stick with the trend, which remains up, again today.