Seasonal Pressure Easing, Euro-Zone Hopes Building

October 25, 2011 01:17 AM

What Traders are Talking About:

* Harvest rapidly progressing, attention turning to demand. USDA says 80% of the soybean crop and 65% of the corn crop was harvested as of Sunday. The harvest pace for both crops is well ahead of the five-year averages. Aside from rain delays in the far eastern Corn Belt, conditions have been favorable for a quick harvest. With the rapid harvest pace, seasonal pressure is waning and there are increased signs of seasonal lows. Focus now is on demand as traders see how aggressively end-users book supplies.

The long and short of it: Strong end-user buying is needed to trigger sustained buying interest in corn and soybean futures.

* (Im)patiently waiting on EU summit. Investor hopes remain high that European leaders will come to an agreement on a rescue package for the euro-zone at tomorrow's summit. That has boosted risk appetite. But whether that translates into willingness to aggressively add risk remains to be seen. Given the highly uncertain (and fluid) nature of this situation, investors are likely to use some refrain, especially since U.S. markets may be done trading tomorrow before details of the plan are announced -- if a rescue plan is agreed to.

The long and short of it: If there's a strong push toward a risk-on stance today, there's risk of a "sell-the-fact" reaction when final rescue plan details are released.

* Initial winter wheat CCI ratings better than year-ago. USDA's initial winter wheat crop condition ratings of the fall showed 47% of the crop rated "good" to "excellent," which is the same as year-ago. But when USDA's ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 = crop failure; 500 = perfect crop), both the HRW and SRW crops are better than year-ago. The initial CCI rating for HRW is 328 compared to 320 last year, while the first CCI rating for SRW is 364 versus 339 last year. But with a low starting point for the HRW crop, weekly condition ratings will be a focal point into dormancy.

The long and short of it: The initial crop condition rating for the HRW crop might be slightly better than year-ago, but there is concern in the Central and Southern Plains, especially with the extended weather outlook through January calling for above-normal temps and below-normal precip.


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