Does Cool August Forecast Mean An Early First Frost?

July 31, 2013 01:18 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are fractionally higher (September contract) to 2 cents lower (new-crop contracts), August soybeans are steady while new-crop contracts are 3 to 7 cents lower and wheat futures are slighlty higher in most contracts. Light and choppy trade is likely to continue into the day session. Cattle futures are expected to trade mixed with a slight upside bias, while hogs are likely to open with a mildly firmer tone amid corrective short-covering.


* Is an early frost likely? With below-normal temps expected across the Corn Belt through mid-August and some forecasters calling for those conditions to persist into the second half of the month, producers are beginning to wonder if that means an early frost is likely this year. The answer to that depends on the weather forecaster you talk with. Some say there is a correlation, while others say there isn't a direct link. So in a nutshell... we'll have to wait to see what cards Mother Nature deals us this fall. From an impact standpoint, an earlier-than-normal frost this year would be devastating across the Corn Belt, especially in the western Belt. Even with a normal first frost date, the western Belt crop would take a hit due to delayed development, but the impact to the eastern Belt wouldn't be nearly as severe as crop maturity has largely caught up after the slow start.

The long and short of it: Producers are worried about a potential early (or even normal) first frost this year, but traders are focused on what they deem to be favorable growing conditions.

* GDP, FOMC today, jobs report Friday. Much of investors' attention today will be on the Fed as it concludes its two-day Federal Open Market Committee (FOMC) meeting around 1 p.m. CT. There's hope the post-FOMC statement will give an indication of when the Fed may begin to taper its bond-buying program. But investors will also be closely watching 2nd-qtr. GDP this morning and the jobs data Friday morning as Fed Chairman Ben Bernanke has said the decision to taper the economic stimulus will largely be based on economic growth and the health of the labor market.

The long and short of it: While the Fed is trying to be more transparent with its intentions, I highly doubt the post-meeting statement will provide any concrete details as to its future plans. Most likely, the FOMC statement will leave economists scratching their heads as they try to guess when the tapering will begin.

* August soy contracts enter delivery. Today marks the start of the delivery process for August soybeans and soy products. As expected, there were no deliveries against the August soybean or soybean meal contracts due to very tight supplies. August soybean oil deliveries were heavier than expected at 846 contracts.

The long and short of it: With no deliveries today and none expected through the two-week delivery process, there could be some fireworks as short position holders try to get out of those positions.


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