What Traders are Talking About:
* Weather back in focus. Very light and scattered rains were seen across the Corn Belt over the weekend, although conditions were mostly dry. Forecasts for this week call for mostly dry conditions with normal to slightly above-normal temps. But it's the mid-range outlook, calling for above-normal temps and below-normal precip across virtually all of the key production areas which has traders concerned. While last week's rains provided some temporary relief in areas where they fell, the rains weren't heavy enough and coverage was light, especially in the driest areas.
The long and short of it: If forecasts continue to call for above-normal temps and below-normal precip, traders will build weather premium into the market, especially for corn futures as concerns with the crop are increasing.
* But some focus still on Europe. While grain traders' focus is shifting mostly to weather, macro-economics can't be ignored as the euro-zone problems aren't going away anytime soon. But there are already heavy bets on the short side of the euro (long side of the dollar), meaning much of the doom and gloom is already "in" the market for now. Investors are now watching to see if conditions temporarily stabilize in Europe or if fresh negative news floods in. That will determine if they need to more aggressively pressure the euro.
The long and short of it: With investors so heavily loaded up on the short side of the euro, the market may be due for a correction (or at least a pause), but there is concern the problems in Europe are spreading to the U.S. and China, which will prevent a strong euro recovery (dollar pullback).
* Watching for Chinese demand. Rumors of Chinese demand for U.S. corn surfaced late last week as basis firmer. As a result, traders are keeping a close watch out this week for confirmation. There is also some hope China will see the sharp price break in soybean futures as a buying opportunity.
The long and short of it: While it wouldn't be surprising to see China buy U.S. corn or soybeans, Argentine and Ukrainian corn is currently cheaper than U.S. prices, while Chinese soy crush margins are negative and processors have been more actively buying state-owned reserves recently.
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