'Fed Speak' In Focus Today

06:39AM Jun 19, 2013
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What Traders are Talking About:

Overnight highlights: As of 6:30 a.m. CT, corn futures are steady to 3 cents lower, soybeans are 1 to 2 cents higher, while wheat futures are mildly weaker in Chicago and Kansas City and modestly firmer in Minneapolis. A varied price tone is likely on the reopening of trade this morning. Cattle and hog futures are expected to trade firmer this morning, with nearby lean hog futures leading the way.


* 'Fed speak' fully in focus today. The bulk of the investment world is firmly focused on the Fed today as the two-day Federal Open Market Committee Meeting wraps up at 1 p.m. CT with a statement on financial conditions and monetary policy, including longer-term economic forecasts. Shortly after the Fed statement, Chairman Ben Bernanke will hold his quarterly press conference. Investors are looking for some clarity on when (and possibly how) the Fed will begin to unwind its quantitative easing.

The long and short of it: Every word of the Fed's statement and Bernanke's comments will be closely dissected as investors try to gauge when the Fed tapering will begin. Even one misinterpreted word could send the wrong (or a distorted) message.

* Weather remains a grab bag. Some say weather/growing conditions are turning near ideal amid warmer temps and sunshine. But weather conditions are far from ideal in areas where producers are still working to wrap up plantings and had to mud in crops that have been seeded. The uncertainty with weather/growing conditions is likely to continue near-term as forecasts call for warmer temps, which are needed, but there are also multiple rain chances for the wettest areas through next week.

The long and short of it: The mixed bag of weather and attitudes toward growing conditions are likely to keep near-term price action choppy in the corn and soybean markets.

* Key time for July corn. July corn futures filled the April 1 gap at $6.76 yesterday morning, but stopped right at the 62% retracement of the price drop from the March high to the April low. The inability to find active buyers above $6.76 and to push through the 62% retracement is a potential warning sign for old-crop corn. But fundamentally, the situation remains bullish as supplies are tight and basis is strengthening. The most concerning part of yesterday's price action is that the rally attempt in July corn stalled amid a surge in basis. That's a potential warning sign traders may start to unwind bull spreads despite bullish fundamentals. In fact, there is some talk about the large break in the July/December corn spread during the third week of June the past two years, which may be influencing trading patterns.

The long and short of it: If traders start actively unwinding bull spreads in corn, it would be the signal to finish old-crop sales.


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