Big Crop Estimates Trigger Bullish Price Response

August 13, 2013 01:08 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn and wheat futures are 1 to 3 cents higher while soybeans are 11 to 13 cents higher. Soybeans are expected to lead a higher open when the day session starts at 8:30 a.m. CT. Cattle futures are called higher while hogs are seen opening mixed this morning.

 

* Big crop estimates, but bullish reaction. USDA's first survey-based look at the corn and soybean crops produced what would be a record corn crop and the third largest soybean crop on record -- if realized. USDA's first corn crop estimate came in at 13.763 billion bu. on a yield forecast of 154.4 bu. per acre. The initial soybean estimate is 3.255 billion bu. with the national average yield forecast at 42.6 bu. per acre. Despite the big crop estimates, there was a bullish reaction as the corn crop came in 242 million bu. less than expected and the soybean crop was 81 million bu. lower than anticipated.

The long and short of it: The combination of the smaller-than-expected crop estimate and the recent surge in new-crop export demand has put a short-term low in for soybeans. December corn futures posted a bullish reversal Monday, but the corn market still has work to do before there is confidence in a short-term low.

* Funds ready to buy again? Funds bought 14,000 contracts (70 million bu.) of corn and 11,000 contracts (55 million bu.) of soybeans Monday. With funds holding a record short position in the corn market and having dramatically reduced their long position in soybeans, yesterday could have been nothing more than a correction to recent price action... but it could have marked an important turning point. As a result, near-term fund activity deserves to be watched closely as that will likely continue to play a key role in the price-discovery process.

The long and short of it: Evening a lessening of fund selling would alleviate a key recent source of price pressure on the market, while a shift from funds being active sellers to being buyers would be supportive for corn and soybeans.

* Forecast lacking precip chances. Short-range forecasts continue to call for unseasonably cool temps, but there's very little precip in the outlook into early next week. After that, heat could move back into the country's midsection as the National Weather Service is calling for normal to above-normal temps Aug. 18-22, while normal to below-normal precip is likely. The warmest and driest areas are expected to be in northern and western locations of the Corn Belt.

The long and short of it: The lack of widespread, meaningful precip is a building concern for many producers, especially in the western Corn Belt. Yield prospects will slip in the driest areas if the 10-day forecast validates and rainfall is very limited over that period.

 

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