Crop Worries Heighten Following Holiday Break

September 3, 2013 01:03 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading mostly 7 to 9 cents higher, soybeans are mostly 33 to 46 cents higher and wheat futures are 1 to 5 cents higher. Weather is the fuel behind the strong surge in soybeans overnight, suggesting the price strength should continue into the day session. Cattle and hog futures are expected to open the week with a mixed tone.


* Not enough weekend rainfall; heat rebuilds this week. Some areas of the Corn Belt were fortunate to get precip over the holiday weekend, but rains weren't nearly heavy enough or widespread enough to have a meaningful positive impact on crops. This week's forecast calls for heat to rebuild after mild days yesterday and today, with temps expected to be above normal across the corn Belt the rest of the week. Just as importantly, the outlook is dry. The hot and dry conditions will continue to stress crops. After traveling through northeastern Iowa this weekend, crop stress is very evident. The lighter soils are easy to pick out -- even from the road.

The long and short of it: Bulls are controlling price action to start the week amid the unfavorable weather as traders are fearing yield losses.

* Surprise, China will buy more corn. China's ag minister says the country will "gradually increase" corn imports as demand for the feedgrain is rising as protein consumption builds and the corn processing industry expands. The ag minister's comments are the first public admittance that China will gradually move away from its self-sufficiency stance. Until now, China has proclaimed that it would be able to account for growing corn demand with increased domestic production.

The long and short of it: The door is open for the U.S. to ship more corn to China, but China has also recently freed up greater trade avenues with Argentina and Ukraine.

* China's factory sector shows growth. China's official purchasing managers' index (PMI) came in at a 16-month high of 51.0 in August versus 50.3 in July. China's final HSBC PMI also showed expansion in the vast manufacturing sector, coming in at 50.1 versus 47.7 in July. The upbeat factory data suggests the world's second largest economy is strengthening after a downturn earlier this year.

The long and short of it: With China's economic data strengthening, the macro-economic environment is improving. That could start to bring more speculative interest into risky assets like commodities.



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