Winter Returns

April 14, 2014 01:01 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 4 to 5 cents higher, soybeans are 2 to 6 cents higher in old-crop contracts and narrowly mixed in new-crop contracts, while wheat futures are 12 to 15 cents higher. Cattle and hog futures are expected to open the week with a mixed tone.


* Winter conditions return. Wheat futures surged overnight amid weather concerns. Weekend rainfall totals were again disappointing in the driest southwestern areas of HRW country over the weekend. But sub-freezing temps overnight and forecasts calling for another hard freeze tonight/Tuesday morning in the Southern and Central Plains is garnering the most attention as traders fear freeze damage to a crop that's already struggling. Meanwhile, heavy rains and snow fell on the Northern Plains and Corn Belt Sunday/overnight in a cruel twist after summer-like temps Saturday. This week's forecast calls for below-normal temps and limited rainfall chances through the Plains. Any rains are expected to favor northern areas. For the Corn Belt, scattered rains are likely with below-normal temps the first half of the week.

The long and short of it: Weather concerns fueled overnight gains in wheat and corn. Traders fear more damage to an already suspect HRW crop, while corn planting efforts will be on hold for most across the Corn Belt this week.

* Tensions rise between Ukraine and Russia. Clashes in eastern Ukraine prompted an emergency meeting of the United Nations Security Council. Russia sought the UN meeting as prospects for a negotiated end to the crisis were set back after camouflaged gunmen fired on government forces in eastern Ukraine. U.S. and Ukrainian officials accused Russia of being behind the violence, raising the potential for additional sanctions. Meanwhile, Ukraine's acting president now says he is not opposed to a countrywide referendum on possibly granting regions greater autonomy. A referendum on greater independence from the central government in Kiev has been a key demand made by the militias that have commandeered government buildings in the east.

The long and short of it: Rising tensions between Ukraine and Russia are adding to the price support in the wheat and corn markets to open the week amid concern that grain supplies from the region may be disrupted.

* Holiday trading schedule could add to price volatility. There is a lot of uncertainty in the grain and soy complex to open the week from the situation in Ukraine to weather. On top of that uncertainty, an extended holiday weekend is upcoming as markets are closed for Good Friday. That could very well add to price volatility as traders will may flip-flop several times on how they want to be positioned for the long weekend based on how these uncertain situations develop.

The long and short of it: Weather and geo-political issues are highly volatile to begin with, but when they team up and happen during a holiday-shortened week, there is potential for extreme price volatility.


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