Weather Concerns Ease, Focus Shifts

January 7, 2014 12:21 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading steady to fractionally lower, soybeans are 4 to 8 cents lower and wheat futures are narrowly mixed with most contracts fractionally to 2 cents lower. I expect a mildly weaker tone to continue into the daytime hours. Cattle futures are expected to be mixed with a slight upside bias, while hogs are called mildly weaker.


* Cold blast coming to an end. The Midwest must endure another day of very cold temps, but the forecast holds hope for a desired warmup. Temps are expected to inch above breakeven today and then move near to slightly above normal the second half of the week across the country's midsection. With the warmer temps, snow and rain is also expected over the coming days, though no major snowfall is currently expected. Winterkill concerns with the winter wheat crop are minimal at this point despite record-low temps yesterday in some areas. Impacts to livestock should also be limited as the warmup will allow for producers to market animals and for animals to make up for weight loss during the arctic blast.

The long and short of it: The arctic blast was much more of a human factor than a market factor. Forecasts calling for more "normal" winter conditions will shift traders' focus away from weather.

* Relief rains forecast in Argentina. Extremely hot conditions are baking La Pampa and southern Buenos Aires, but needed rains are expected to move into the region Wednesday and last for a couple of days. The main corn and soybean production areas of the country haven't had the extreme heat, but are also in need of some relief rains, which are forecast over the coming days. Meanwhile, growing conditions remain generally favorable in Brazil. While there are some minor concerns, there are no major issues and crops are developing satisfactorily.

The long and short of it: Barring prolonged heat and dryness in South America, it's going to be difficult for corn and soybean futures to find sustained strength as South America is in the midst of growing a record soybean crop and the supply concerns in the corn market have been "cured" by the record 2013 crop.

* Yellen confirmed. Janet Yellen was confirmed Monday to lead the Federal Reserve after current Chairman Ben Bernanke's term expires Jan. 31. She becomes the first woman to lead the Fed, which is of historical importance. But the importance of her confirmation from a monetary policy standpoint is greater. Yellen is seen continuing down the same path as Bernanke, meaning the Fed will maintain some quantitative easing for some time. Yellen's critics argue this could ultimately be the downfall of her and the U.S. economy as it eventually points toward inflationary pressure. Yellen, and her supporters, feel the Fed will be able to unwind the quantitative easing without strong inflationary pressure. Time will tell.

The long and short of it: Yellen's confirmation was widely expected and is not an immediate market-moving event. But as I mentioned above, her leadership on how the Fed unwinds its quantitative easing will have an impact on the economy longer-term.


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