Traders Sorting Through Weather, Still Trying To Figure Out Corn Stocks

April 12, 2013 01:34 AM

What Traders are Talking About:

Overnight highlights: As of 6:30 a.m. CT, corn futures are 3 to 6 cents higher, soybeans are 3 to 9 cents higher with old-crop contracts leading gains and wheat futures are 3 to 7 cents higher. Based on overnight price action, grain and soy futures are expected to open the day session higher on short-covering ahead of the weekend. Cattle futures are expected to open steady to weaker, while hogs are likely to favor a mildly firmer tone on the open this morning.


* More cold and wet ahead. The National Weather Service's for the next two weeks calls for a continuation of the current cold, wet pattern. The 6- to 10-day outlook for April 17-21 shows below-normal temps over the entire Corn Belt with the coldest readings over the Dakotas and Minnesota, while rainfall is likely to be above normal from the eastern halves of Minnesota and Iowa eastward with the wettest conditions expected over Indiana, Ohio and Kentucky. Far western areas of the Corn Belt are likely to see normal precip during the period. The 8- to 14-day forecast for April 19-25 is very similar, though the forecast doesn't look as cold or quite as wet based on the intensity indications.

The long and short of it: If this forecast verifies, corn planters will be parked through the end of the month across the vast majority of the Corn Belt. With USDA's corn planting progress figures starting next Monday, corn planting delays will get more attention.

* The waiting game. This week's freeze event in the Central and Southern Plains obviously did some damage to the winter wheat crop, but only time will tell how much. Crop scouts say it will be at least 10 days before they can get a good indication of how much damage was done. And even then, it will be nearly impossible to quantify the bushels lost to the freeze. Even some of the hardest hit wheat can recover -- if post-freeze conditions are right. A worst-case scenario would be hot and dry conditions, while cool and wet conditions would give the wheat crop the best chance to shoot new tillers. Based on the National Weather Service forecast, cool and dry appears likely for HRW wheat country.

The long and short of it: Traders have been slow to factor crop damage into wheat prices. As some of that damage shows up in crop condition ratings, traders are more likely to build some weather premium into wheat futures, but traders will also closely monitor weather conditions as they try to gauge how the crop will recover.

* USDA has no answers for corn stocks. Everyone, including the ag department, is still trying to figure out how USDA's National Agricultural Statistics Service (NASS) showed March 1 corn stocks nearly 400 million bu. above trade expectations. A Reuters story quotes NASS director of the statistics Joe Prusacki as saying, "What is going on with corn? I don't know. That's the question." Prusacki says, "I believe farmers tell me what they believe to have in their facilities," but notes the dramatic increase in on-farm storage raises some questions on that angle. Prusacki shot down the idea it could be due to corn stocks stored at ethanol facilities, saying NASS has ethanol plants "covered."

The long and short of it: The market has lost confidence in USDA's quarterly corn stocks figures, but as long as there are major misses compared to analysts' expectations, the data will continue to have major market-moving implications.


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