Today in the Grains: Outside Markets or Weather???
May 31, 2012
Weather is obviously going to be critical in the days ahead, especially if you consider how far "topsoil moisture" ratings have fallen in the past couple of weeks. Following are the percentage of topsoil moisture rated "short-to-very short" along with how far they have moved int he past tow weeks: Arkansas now rated 82% "short-to-very short," two weeks ago just 41; Missouri now 77%, two weeks ago 23%; Kansas now 74%, two weeks ago 36%; Indian now 71%, two weeks ago just 15%; Illinois now 63%, two weeks ago 12%; Iowa now 51%, two weeks ago just 9%; Ohio now 50%, two weeks ago just 4%. I think you get the picture. We have lost a ton of top soil moisture the past couple of weeks, if the rains don't as forecast, this crop could quickly start to see reductions to yields.
Weather models seem to be showing some new "uncertainty" in regards to precip amounts and coverage, especially in parts of Illinois and Iowa. I am also starting to hear more concern about the crop down in the Delta region, as it is starting to see early silking. I think right now the weather is a complete crapshoot over the next couple of weeks. I wish I could tell you more. Forecasters are calling for just enough rain and cooler temps, getting what they are predicting however could be an entirely different story.
As for today, traders will be patiently waiting for updated weather forecast to give more insight into this weekends coming rain events and more details about the "high pressure ridge" that should start to build over the western corn belt next week. Export sales numbers are delayed for a day because of the holiday, but the trade will be eager to digest this weeks ethanol production totals. There is also no doubt the "outside" market headlines will continue to weigh on the overall direction of the trade. My gut tells me the risk is to the upside. I feel the market has already priced in a large majority of the meltdown in Europe and has already priced in cooler temps and ample rainfall. Therefore if these events occur, and play out like the trade is anticipating, then yes, we break a little lower, however I doubt significantly lower. On the flip side if Europe comes up with some crazy new plan or elections in Greece go to the more conservative party, and the rains don't measure up, then we are heading higher. How long we can maintain some type of rally is an argument for an entirely different day. Producers need to keep hedges in place while specs should be trading extremely small in these volatile waters. End-of-month position squaring should produce a two-sided traded. I like the thought of being somewhat long heading into the new month and into an important weekend of weather.
We are making some moves in response to what the market is showing us. You can sign-up here to receive a FREE trial of my Daily Grain and Livestock commentary in which you will see where I stand on cash sales and some strategies on how you can take advantage of "Money-Flow" and the Outside Markets. Just click here - Van Trump Report