Weather, Funds Keeping Pressure on Corn

August 5, 2013 01:07 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are 2 to 4 cents lower, soybeans are steady to 9 cents lower in all but far-deferred contracts and wheat futures are mixed. Weather remains price-negative for corn and soybeans, but traders may opt to cover some short positions. Live cattle futures are expected to open the week with a firmer tone, while hog futures are called mixed this morning.


* Non-threatening weather continues. Rains developed in Minnesota and are moving through north-central and northeastern Iowa this morning. Another wave of rains is forecast to move through the western Corn Belt later today with rainfall chances expected to continue into Tuesday. Meanwhile, temps are expected to remain below normal across the Corn Belt this week. The National Weather Service (NWS) 6- to 10-day forecast for Aug. 10-14 calls for below-normal temps and normal to above-normal precip to continue. The NWS 8- to 14-day forecast calls for below-normal temps and above-normal precip for the entire Corn Belt Aug. 12-18.

The long and short of it: The non-threatening weather gives traders no reason to be fearful of the short side of the market, which limits the upside to corrective buying.

* Funds add to short position. As expected, data from the Commodity Futures Trading Commission shows funds added to their short position over the period to July 30. The traditional report shows large speculators short 67,883 contracts of corn (futures and options combined), while the disaggregated report shows managed money short 108,089 contracts of corn (futures and options combined). With speculators record short corn, it's clear attitudes are bearish and they believe the corn crop is getting bigger amid the non-threatening weather.

The long and short of it: Key to price action this week is whether funds continue to build their record short position or opt to cover some shorts ahead of next Monday's Crop Production and Supply & Demand Reports from USDA. I'd be surprised if there isn't some late-week short-covering ahead of the reports.

* China to auction soybeans this week. China will auction 500,000 MT of state-owned soybeans from the provinces of Heilongjiang, Inner Mongolia and Jilin on Thursday, according to a notice from the National Grain Trade Center of Hefei. Demand for the beans is expected to be limited as the auction price is expected to be above (potentially well above) that of soybean imports. But if the auction is successful, China could try to sell more state-owned reserves.

The long and short of it: The Chinese state-owned soybean sales have been rumored for weeks, so this is not a surprise. Key will be how many of the 500,000 MT of initial offerings are purchased.


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