What We're Watching This Week - Dec. 12, 2016

Dry Conditions in Argentina Come into Focus After Crop Reports:

CLIMATE

Although the USDA maintained its view on Friday that US soybean stocks will reach a 10-year high at the end of the 2016-17 marketing season, the May ‘17 soybean contract (CBOT) is still holding its ground. That might be a result of concerns about dry planting/growing conditions across Argentina. As such, we will be closely watching evapotranspiration readings across the country’s top three soybean producing states, which deliver over 80 percent of annual production. We took a first glance at the monthly reading for November 2016, which shows evapotranspiration mostly above the median 10-year reading. Since evapotranspiration tends to increase during early stages of dryness or drought this snapshot fits in with recent weather reports. However, we will be watching for more clarity in the coming weeks as climate data is updated.

Monthly evapotranspiration anomalies in the major soybean producing regions of Argentina, relative to 10-year median levels.

Malaysia's Palm Oil Output Likely Dropped in November:

COMMODITIES

The Malaysian Palm Oil Board (MPOB) is scheduled to release palm oil production and stocks data on Wednesday. According to a Reuters survey, palm output is expected to have declined by 2.8 percent in November, as fresh fruit yields in the country remain negatively impacted by El Niño. Still, oil stocks will likely increase as export demand has been sluggish. Nevertheless, palm oil futures hit a four-year high in recent weeks, as market participants anticipate a future demand recovery and that the lingering impact of El Niño on production will keep global supplies tight through 2017.

Port reference prices of palm oil in Northwest Europe, and stocks of palm oil in Indonesia and Malaysia.

Brazil’s Robusta Coffee Production Drops to 10-year Low:

FOOD

The global price composite for robusta coffee has risen by slightly over 25 percent in 2016 because of a sharp production drop in Brazil’s state of Espirito Santo. In fact, Rabobank forecasts a 5.3 million bag robusta production deficit in the 2016-17 marketing season. Despite the tight robusta supply outlook, Colombia’s arabica coffee production update last week—plus 4% this season—is pressuring New York March arabica coffee futures. We will be watching closely to see if the Wednesday production report from Brazil’s national supply company (Conab) confirms the USDA’s recent forecast increase for Brazilian arabica production this season.

Composite prices of arabica coffee and EU market prices of robusta coffee.