Grain Traders Firmly Focused On Weather

May 29, 2012 01:45 AM

What Traders are Talking About:

* Weather focus builds. With the calendar flipping to June later this week and concern among among some producers building regarding crops, traders will be more focused on weather. Some areas received beneficial rains over the holiday weekend, but the coverage was spotty and high temps stressed crops in areas where rains didn't fall or were lighter than hoped, especially in southern and eastern areas of the Corn Belt. This week's forecast calls for relief from the recent heat and a chance of precip, although forecast models differ on coverage levels and amounts. The best chance for rains comes mid-week, with some forecasters calling for inch-plus rains across much of the central Corn Belt. Meanwhile, weather is also a focal point in other areas of the world. Eastern Australia received beneficial rains over the weekend, while Western Australia remains in need of precip. Areas of the Black Sea region also got beneficial rains over the weekend.

The long and short of it: The weather is price-negative for corn and wheat to start the week, but that could change, especially for corn if forecast rains don't material this week as the National Weather Service 6- to 10-day forecast calls for above-normal temps and below-normal precip over most of the Corn Belt, along with the Plains and much of the South June 3-7.

* One eye on Europe. While weather is the primary fundamental focus for grain traders, they (along with all investors) are keeping a close watch on the situation in Europe. Spain pumped $24 billion into lender Bankia, the country's third largest bank, as the government tries to shore up its weak banking sector. Meanwhile, polls show pro-bailout conservatives have taken the lead in Greece.

The long and short of it: Many are expecting the euro to weaken further near-term as the region continues to struggle with a multitude of financial problems.

* Chinese stimulus coming soon? Helping ease some of the concerns in Europe -- at least to start the week -- are expectations China will soon launch a new round of stimulus for its economy. Chinese banks have reportedly boosted spending the second half of this month and there is speculation the Chinese government will attempt to boost domestic spending and could unveil new tax incentives. Last week, Premier Wen Jiabao said China remains focused on promoting economic growth while controlling inflation. But China has no plan to introduce stimulus measures on the scale deployed during the global financial crisis to counter this year’s economic slowdown, the official Xinhua News Agency reports.

The long and short of it: The Chinese stimulus talk is supportive for commodities, especially soybeans and industrial metals -- at least temporarily.


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