Long WInter Finally Coming To An End

April 25, 2013 01:16 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading around a nickel higher in old-crop contracts and 1 to 2 cents higher in new-crop contracts, soybeans are 12 to 13 cents higher in old-crop contracts and mostly 6 to 10 cents higher in new-crop contracts, and wheat futures are mostly 2 to 5 cents higher. Based on overnight price action and sharp pressure on the U.S. dollar index, grain and soy complex futures are expected to open the day session firmer. But weekly export sales data will have a say in price action. Cattle futures are expected to open with a steady to mildly firmer tone this morning, while hog futures are called mixed with a slight downside bias.


* Spring is finally here. Winter hung around much longer than hoped -- and is still hanging around in northern areas -- but temps are finally on the rise. In fact, some areas are expected to see summer-like temps early next week. The improved weather will facilitate a strong pickup in the corn planting pace as farmers across the Corn Belt are itching to get going. But there are concerns among farmers in how quickly soils will be in condition to seed the crop the "right" way. So, while traders are focused on the improved weather forecasts, the anticipated pickup in planting and the longer-term benefits of recent, heavy rains, farmers still have some concerns. Soil conditions at planting impact crop stands and root development, which are yield-determining factors down the road.

The long and short of it: Corn planting should ramp up quickly if the improved weather forecasts pan out. But getting the seed in the ground is just an initial step. The entire growing season lies ahead.

* Dollar encouraging short-covering in grains. The U.S. dollar index is under heavy pressure this morning, which is supporting a corrective rebound in grain futures. But weakness in the U.S. dollar can't be counted on for continued support. For grains to put in solid lows, fundamental support is needed or funds must halt their recent selling and start flowing money into the long side of the grain markets. Considering grain traders have ignored corn planting delays and HRW weather struggles, fund buying seems like a more likely catalyst. But given heightened attention to macro-economic concerns, this isn't an environment that's inviting for funds to actively pump money into the long side of commodities.

The long and short of it: Aside from short-covering and value buying, the upside appears limited for grains near-term. Grain traders are likely to sell price strength unless there's a bullish catalyst.


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