What Traders are Talking About:
Overnight highlights: As of 5:45 a.m. CT, corn futures are 15 to 19 cents higher, soybeans are mostly 44 to 55 cents higher and wheat futures are 8 to 12 cents higher. Given the very hot and dry forecast, bulls will maintain a strong upper hand this morning. Cattle and hog futures are expected to open firmer this morning.
* Pro Farmer crop estimates. Pro Farmer pegs 2013 U.S. corn crop at 13.46 billion bu.; Average yield of 154.1 bu. per acre: +/- 1% = 13.595 billion bu. to 13.325 billion bu.; 155.6 bu. to 152.6 bu. per acre.
Pro Farmer pegs 2013 U.S. soybean crop at 3.158 billion bu.; Average yield of 41.8 bu. per acre: +/- 2% = 3.221 billion bu. to 3.095 billion bu.; 42.6 bu. to 41.0 bu. per acre. Note: These estimates are based on assumptions for normal weather through September, which would be about perfect for the crops. We took 1.8 million off of harvested acres for corn and 800,000 harvested acres off of soybeans to reflect the Prevented Plant acres in Iowa and Minnesota. It's dicey estimating crops in a year with so many challenges. We have two opportunities to be wrong with our estimates -- we've made adjustments to planted and harvested acreage and have issued state-by-state yield pegs.
The long and short of it: Due to the late maturity of this year's crops, we'll continue to monitor weather and crop conditions very closely through the end of the growing season and adjust our production and yield forecasts as necessary.
* Hot and dry. If there was a shock for me last week on Crop Tour, it was the level of dryness across areas of Indiana and Illinois. Crops in the driest areas of these states were already showing definite moisture stress, especially corn as plants are firing/fired and kernels are being aborted. This week's weather will add to the crop stress as forecasts call for above- to much-above-normal temps and virtually no rainfall. If this forecast materializes, it will zap yield potential across the Corn Belt, especially in the driest areas.
The long and short of it: Markets are responding sharply to the very hot and dry forecast as traders are building yield losses into prices. But supply-scare rallies are typically short-lived, with last year obviously being an exception.
* Cattle on Feed Report -- bullish. Last Friday's Cattle on Feed Report showed all three categories on the bullish side of pre-report expectations, with On Feed at 94%, Placements at 90% and Marketings at 105% of year-ago levels. The most bullish was the Placements category as it came in well below the average trade guess and below the bottom end of the guess range. July placements were the lowest for that month in five years.
The long and short of it: The data is bullish for cattle futures, with the most strength likely in far-deferred contracts given the surprisingly low Placements number.
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