What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are trading fractionally to 2 cents lower, soybeans are mostly 1 to 5 cents lower and wheat futures are mixed with a slight downside bias. Unless weekly export sales data is bullish, grain and soy futures are likely to favor the downside. Cattle futures are expected to be mixed this morning as traders wait on direction from the cash market, while hog futures are expected to favor the downside.
* Funds clearly showing their bias. Funds covered short positions in the corn market last week and Monday, but have returned as sellers the past two days. The fund activity signals they are convinced it's a big corn crop and the heat is not a major concern. For soybeans, funds are building a long position, clearly signaling they are more bullish toward that market than corn. Since the overall crop outlook and long-term fundamentals are much the same for corn and soybeans, there has to be something that is making funds much more friendly toward soybeans than corn. That "something" is demand. The run to record corn prices last summer sharply curbed corn demand, especially export demand. The runup to record soybean prices last year nipped soybean demand, but didn't reduce it appreciably.
The long and short of it: In addition to trying to rebuild its demand base, the corn market is also having to restore fund interest in the long side of the market. Neither is proving to be easy to accomplish.
* Wow, it's hot. The string of unseasonably hot temps will continue into the holiday weekend. Temps are forecast to remain in the 90s across the Corn Belt, with heat index readings nearing or pushing into triple digits. Some modest relief is likely by early next week, but even then, temps are expected to remain above normal. Light and scattered rains are also possible as the "cooler" temps replace the oppressive heat that's hammering the region. The National Weather Service 6- to 10-day forecasts, which has been offering hopes of increased rainfall the past couple days, turned drier in yesterday afternoon's run. NWS is calling for below-normal precip over the entire Corn Belt Sept. 3-7, with much of the western Belt expected to see above-normal temps while much of the eastern Belt is expected to see below-normal temps during the period.
The long and short of it: Forecasts offer little meaningful "relief," though temps shouldn't be as hot in early September and some scattered rains may creep into the region.
* Crops showing stress. I drove to Tracy, Minnesota, on Tuesday and crops were wilting under the oppressive heat on the entire drive. Patches of soybeans fields were "giving up" in the heat and some of the corn was tuning ashen in color -- clear signs of heat and moisture stress. With the blast furnace continuing, the amount of crop stress is only increasing. While the late-maturing crops need heat to push development, the current heat wave is too much. At the same time the heat is pushing development, it's also taking the top end off yield potential. So... the heat is a catch-22, though I believe there's probably more damage than good coming from the extreme heat.
The long and short of it: To build big yields, you want to rush corn to pollination and then get a "slow cook" through grain fill. This year has been the exact opposite. And beans need late-season rains and cooler temps to add and fill pods that are needed for strong yields.
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