Can We See More Fund Short Covering?

Published on: 13:14PM Oct 08, 2014

Good Morning! Paul Georgy with the early morning commentary for October 8, 2014 at 4:30 am.

Grain futures are mostly steady ahead of reports.

Traders Focus: USDA report, fund activity, direction of the US Dollar and weather forecast for the weekend in US and Brazil.

Trade is beginning to hone in on dry conditions in Brazil. We had the same concerns last year at this time and went on to produce a record crop in Brazil. US weather has heavy moisture falling across the cornbelt starting later today through next week. The amounts are yet to be determined and will be a concern to soybean harvesting.

The Chinese are back from a week holiday which could bring more volatility ahead of Friday’s report.

Lack of export demand and a large harvest has river basis falling.

Funds were estimated to have bought a net 8,000 wheat contracts, 13,000 corn contracts, and were even in soybeans on Tuesday.

U of IL - “Weekly estimates from EIA indicate that ethanol production in September 2014 was about 6.5 percent larger than in September 2013. The large increase, however, reflects the relatively low level of production in September 2013 so that rate of expansion will not likely be maintained.”

US Attaché comments on Argentina: Production costs have increased and commodity prices are down, but farmers view production as less a function of these variables and more a function of the exchange rate and government export policies. With this logic, farmers are not producing soybeans per se but rather hedging as best they can on future currency devaluation(s).

8:00 AM Update:

Eco calendar has the September FOMC Meeting minutes being released today. Trade will be looking for any indication when the Fed will cease QE.

Hog supplies are building and weights are heavier than a year ago. Wholesale pork since mid-September is up $15. The question is who is buying pork? August pork exports were 13% under last year. With the continued advancement in the value of the US dollar, which hurts exports, we doubt that the export situation has improved which leads us directly to the US consumer. Has the lower price of pork compared to beef caused the consumer demand to pick up sharply over the past three weeks? Gas pump prices have declined in recent weeks which are providing more dollars for food. Pork cutout value is down .70.

Beef product values jump again on Tuesday with choice up 2.74 and select up 3.09. The CME Feeder Index is 237.57.

Markets as of 4:30 AM CDT                                                                     

  • Dec Corn   -1         
  • Nov Beans   2
  • Dec Wheat   1/2
  • Oct Cattle  .15
  • Oct Hogs    .07
  • Dec Dlr     .06
  • Dec S&P     .50
  • Nov Crude   -1.01
  • Oct Gold    6.20
daily chart

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