What Traders are Talking About:
Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 1 to 4 cents higher, soybeans are 6 to 9 cents higher and wheat futures are 3 to 5 cents higher. Overnight trade signals bulls will have the upper hand in the day session, but unless funds are active on the long side of the market, the upside is limited. Cattle and hog futures are expected to open steady to weaker on followthrough from poor closes Monday, though light short-covering is possible.
* Modest recovery on corn planting delays. USDA reported only 12% of the corn crop was planted as of Sunday, which was far behind last year's 69% and the five-year avearge of 47% on this date. Despite the best progress of the spring so far, planting remains extremely behind normal across the Corn Belt. And emergence stands at only 3% compared to 29% last year and the five-year average of 15%. Still, the limited buying interest overnight signals traders aren't overly concerned. The reason: After another rain event the second half of the week, conditions are expected to turn drier for the next couple weeks. Traders are banking on very active planting progress over the next two weeks and feel the bulk of intended corn acres will get planted.
The long and short of it: It appears severe planting delays would have to extend deep into this month to spark strong concerns. Until the pattern of lower highs is broken, there will be no strong signs of concern with the corn planting pace.
* Still hope for HRW crop. HRW crop conditions continue to deteriorate and the weighted Pro Farmer Crop Condition Index signals the crop is "fair" at best -- and quickly moving toward "poor." Yet price action signals traders believe the crop still has a chance at a miraculous recovery. That's partly due to the slowed maturity of the crop. As of Sunday, USDA reports only 20% of the crop was headed compared to 64% last year at this time and the five-year avearge of 39% on this date. Because of the delayed maturity, the crop still has time for a partial recovery if given ideal conditions the rest of the growing season, though there's little doubt the lingering drought and repeated freeze events have taken a toll on the crop.
The long and short of it: It appears traders will wait until combines roll before they are convinced there has been significant damage to the HRW crop.
* Investors favor equities over commodities. While the commodity indices are in a downtrend, the Dow Jones Industrial Average and S&P 500 have risen to new highs. It doesn't take a lot of analysis to figure out investors are favoring equities over commodities. The biggest problem for commodities is that the current macro-economic environment isn't overly inviting for aggressive investor buying in risky assets. With money flowing into equities, commodities are left without a steady flow of investment dollars. And that's making it hard for commodities, as a whole, to find sustained buying interest.
The long and short of it: Until the macro-economic environment improves and investors take a stronger risk-on stance, the upside is limited for commodities. That doesn't mean individual commodities can't rally, but as a sector, the upside is limited.
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