Non-Threatening Forecast Is Price-Negative

July 5, 2013 01:21 AM

What Traders are Talking About:

Overnight highlights: Grain markets were closed overnight coming out of Thursday's holiday. Based on weather and strong gains in the U.S. dollar index overnight, I expect a weaker open in grain/soy futures at 8:30 a.m. CT. Cattle and hog futures are expected to open with a mixed tone this morning. Price action is likely to be light today as some traders opted to take an extended holiday vacation. However, thin trade could lead to increased volatility.


* Non-threatening weather forecasts. Forecasts signal conditions will be non-threatening over the next 10 days across the Corn Belt. Temps are expected to run normal to slighlty above normal over the next five days, but there won't be oppressive heat. Also, scattered rains are forecast for early next week. The National Weather Service 6- to 10-day forecast for July 10-14 calls for below-normal temps over much of the Corn Belt and normal to above-normal precip. Traders will view this forecast as positive for crop development.

The long and short of it: The post-Fourth period typically leads to a price reversal or an acceleration of the current trend due mainly to the weather outlook. Based on current forecasts, an acceleration of the recent downtrend in prices seems likely.

* South Korea lifts ban on U.S. wheat, Japan's ban still in place. South Korea says it will lift the ban on U.S. western white wheat imports as soon as next week after finding no GMO content after conducting tests of U.S. shipments. However, the country will continue to test U.S. wheat shipments for GMO content. Meanwhile, Japan says its ban on U.S. western white wheat remains intact, though the country has found no GMO content in its testing of U.S. shipments.

The long and short of it: Demand news is gradually turning more positive for wheat, but seasonal pressure continues to hang over the market as harvest continues and corn looks like it will provide spillover pressure.

* Key jobs report this morning. The Labor Department will issue May jobs data at 7:30 a.m. CT, Economists polled by Reuters expect non-farm payrolls to have risen by 165,000 last month. The unemployment rate is expected to tick down to 7.5% from 7.6% last month.

The long and short of it: With speculation continuing on when the Fed will begin to phase out its economic stimulus, this morning's jobs report will be dissected closely.


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