What Traders are Talking About:
* Rain chances reduced. Hopes for a major rain event in the Corn Belt over the next five to six days are diminishing. Private forecasters continue to call for favorable rains for many areas of the western Corn Belt into the middle of next week, but rain chances for the dry eastern and southern Corn Belt have been dialed back from earlier outlooks. Forecast models still show hope for some rainfall in the 6- to 10-day window, although that outlook is somewhat uncertain, especially if rains over the next five days are disappointing.
The long and short of it: If this rain event disappoints, corn traders should be more willing to add weather premium into the market.
* Poll: USDA too high on corn yield. A Reuters poll shows analysts on average see the U.S. corn yield at 161.5 bu. per acre. Not surprisingly, that's well below USDA's current projection of 166 bu. per acre. But of the 15 analysts surveyed, five match USDA's 166-bu.-per-acre peg and one is at 167 bu. per acre. While the corn crop got off to a fast start, there are increasing concerns with dryness, especially in the southern and eastern Corn Belt, which are causing many analysts to lower their yield forecasts.
The long and short of it: While analysts on average feel USDA's yield projection is too high, price action doesn't suggest traders are eager to build weather premium into the market.
* Spain downgraded. Rating agencies Moody's and Egan-Jones both slashed Spain's credit rating Wednesday amid weight from the banking sector and overall poor health of the country's economy. Egan-Jones now gives Spain a junk rating, while Moody's rating is just one rung above junk. The news caused yields on Spanish government bonds to surge above 7% for the first time ever. A private audit reportedly will say Spain needs 60 to 70 billion euros to save its failing banking sector. Meanwhile, there was better-than-expected demand for Italy's government bond auction, although yields rose.
The long and short of it: Euro-zone concerns continue to weigh on investor risk appetite, although markets are handling the downgrade to Spain's credit rating well, signaling they fully expected it.
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