Funds Key To Corn Price Action

May 1, 2013 01:07 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures were 4 to 6 cents lower, soybeans are 13 to 17 cents lower in old-crop contracts and 7 to 8 cents lower in new-crop contracts and wheat futures are mostly 7 to 9 cents lower. Unless there's a dramatic change late in the overnight session, bears will hold the decided upper hand when the day session begins at 8:30 a.m. CT. Cattle futures are expected to open steady to weaker as traders maintain a cautious tone amid demand concerns, while hog futures are seen opening steady to lower on pressure from the premium contracts hold to the cash market.


* Funds key to corn planting roller coaster. Hot, windy conditions the past two days have dried out fields enough to get planters out in some areas of the Corn Belt. Reports of some planting progress have zapped (for now) the strong buying interest seen Monday. How quickly attitudes can change. The biggest change has been with funds. After buying 26,000 contracts (130 million bu.) of corn Monday, funds were sellers of 13,000 contracts (65 million bu.) of corn yesterday. With cold temps and snow (yes, snow) in the forecast for areas of the Corn Belt late this week and given the corn planting pace will remain well behind normal, attitudes could change again -- several times.

The long and short of it: Corn is in the midst of the first weather market of the year, meaning volatility is likely to remain high. Fund attitudes toward planting progress (or lack thereof) is key to price direction.

* Day 1 HRW wheat tour results -- likely best of the week. Participants on the annual Wheat Quality Council HRW tour likely saw the best wheat they will find in central and northern Kansas. The Day 1 average of samples pulled resulted in a yield of 43.8 bu. per acre compared to 53.4 bu. per acre on similar routes last year and a five-year average of 44.2 bu. per acre. While yesterday's results were in line with the five-year average, comments from veteran crop scouts on the tour signal the findings are optimistic unless rains start falling soon as conditions are dry and the crop is behind normal in development. Meanwhile, independent tours in Colorado and Nebraska forecast wheat production in those states of 59.8 million bu. (34 bu. per acre yield) and 42 million bu. (30 bu. per acre yield), respectively. Scouts will take samples from western and southern Kansas today, where they are expected to find a crop suffering from greater drought stress and freeze damage.

The long and short of it: While some traders and farmers are skeptical of tour findings, the data still has market-moving potential as this is some of the most comprehensive "ground truth" on the crop.

* Another red flag for China's economy. China's official manufacturing purchasing managers' index (PMI) dipped to 50.6 in April from 50.9 in March and also came in under expectations of 51.0. While China's vast manufacturing sector is still expanding (reading over 50), the slowed growth last month raises another red flag with the country's economic recovery. The new orders sub-index dipped to 51.7 last month from 52.3 in March, signaling demand remains the primary concern on the manufacturing side amid ongoing problems in Europe and a sluggish recovery in the U.S. -- China's two largest customers.

The long and short of it: The sluggish Chinese data is weighing on commodities, as china is the world's largest consumer of raw materials used in its vast manufacturing sector.


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