Winter Weather Taking Toll On HRW Crop

06:09AM Feb 04, 2014
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What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn, soybean and wheat futures are trading narrowly mixed. Barring fresh market-moving news, choppy trade is likely to continue in the daytime hours. Cattle and hog futures are expected to open mostly firmer this morning amid short-covering after yesterday's losses.


* Winter taking toll on HRW crop. The harsh winter conditions are showing up in winter wheat crop condition ratings in the Plains. Texas state statisticians, which update crop conditions weekly through the winter months, now rate the winter wheat crop 41% "poor" to "very poor" and 19% "good" to "excellent," which is a four-percentage-point swing from the top to categories to the bottom two categories. When the crop entered dormancy, the crop was rated 28% "poor" to "very poor" and 32% "good" to "excellent." Kansas and Oklahoma only update crop ratings once a month during winter. In Kansas, 20% of the crop is now rated "poor" to "very poor" while 35% is rated "good" to "excellent." That's up 14 percentage points in the bottom two categories and down 23 points in the top two categories from last month. In Oklahoma, 24% of the winter wheat crop is now rated "poor" to "very poor" while 36% is "good" to "excellent" -- up 16 percentage points in the bottom two categories and down 27 points in the top two categories from last month. When the crop entered dormancy late last fall, the Kansas wheat crop was rated 4% "poor" to "very poor" and 63% "good" to "excellent," while the Oklahoma crop was rated 5% "poor" to "very poor" and 77% "good" to "excellent."

The long and short of it: Despite drastic declines in winter wheat crop condition ratings since late last fall, traders are not concerned. That's largely because of the strong condition of the crop when it entered dormancy. If the crop deterioration persists, traders will pay more attention as spring nears.

* Heat and dryness grabbing attention in southern Brazil. January was a very hot and dry month in southern Brazil. In fact, the month "will go into the record books as one of the hottest months ever recorded for many cities in southern Brazil including Sao Paulo, Rio de Janeiro, Curitiba (the capital of Parana), Florianopolis (the capital of Santa Catarina), and Porto Alegre (the capital of Rio Grande do Sul)," according to Pro Farmer South American consultant Dr. Michael Cordonnier. He says full-season corn has been the crop most impacted, but the heat and dryness is being noticed by soybean traders. While Brazil will grow a record soybean crop this year, there's now talk the crop won't be as big as once thought. That's keeping soybeans supported. One positive aspect of the dry weather for Brazil, according to Dr. Cordonnier, is that export loadings at the ports of Paranagua and Santos have not been disrupted by rains.

The long and short of it: While the heat and dryness in southern Brazil is supporting soybeans, that support is very likely temporary.

* March corn knocking on the door. Technical action in the corn market is as friendly as it's been in quite some time. But with that said, bulls still have a lot of work to do. March corn futures moved to their highest level since mid-December yesterday. To build upside momentum, however, the contract must clear the Dec. 10 high at $4.40 3/4. A push above that level would open the upside to the Nov. 12 high at $4.49 1/2. And clearing that level would then make bulls' target old support at the August low of $4.59. All of that needs to happen for bulls to gain a solid short-term upper hand.

The long and short of it: In addition to the technical hurdles, there's a lot of corn sitting in on-farm storage that will be moved as prices rise, making an extended rally in the corn market difficult.


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