Mon 19 Aug 2013 07:22:26 CT
Corn futures started the week sharply higher on Sunday evening and the September is up 9 at 6:50 am cst. The December contract is up 8 1/4. Disappointing weekend rainfall helped to spark the rally. US equity indices are trading both sides of the unchanged and the US Dollar is edging lower.
Disappointing rainfall over the weekend and really since the middle of last week for the heart of the Corn Belt prompted fresh buying in the corn market at the opening bell overnight. Weather was certainly favorable for a large percentage of the crop during pollination but since then, a drier trend has prevailed across the Midwest which is prompting concern over tip back and lack of kernel fill. A well-followed Midwest crop tour will begin today and this will provide the market with a fresh look at the crop during this drier weather trend. This week's forecast keeps the Midwest mostly drier with temperatures in the mid to high 80's. There is a chance for showers early next week and the southeast/delta looks wet. It's estimated that about 1/3rd of the US crop area is dry which could be trimmed down some by next week but for now the market is pricing in the dry 5-day map and dryness this weekend.
The trade is looking for declines in crop conditions today with some indicating they could decline by 2-3%. Conditions have a seasonal tendency to decline once the crop is into July and August. Keep in mind, the Commitments of Traders positioning continues to show an extremely oversold position by the fund community. As of August 13th, Non-Commercial traders were net short 75,368 contracts, up 943 contracts for the week while Commercial traders were net long 196,597 contracts, down 6,761 contracts. Non-Commercial and Non-reportable combined traders held a net short position of 196,597 contracts, down 6,761 contracts for the week. Trend following funds (Non-Commercial net of Index Funds) held a net short position of 187,692 contracts, up 628 for the week and this represents a record short position.
There were ideas this past week that shaky global equity markets could result in sizable price declines throughout the commodity complex. While this may be true for commodities in which the funds hold large net long positions, such as cotton, crude oil, and lean hogs, the fund positioning in CBOT Grains (Corn, Soybeans, and Wheat) was net short 243,693 contracts, which was relatively close to the record net short position of 282,750 contracts in February 2005. Global equity weakness and poor macro-market sentiment could provide a boost to the grain complex, as fund traders seek capital and offset their short positions.
Cash finished last week with a bullish tone with interior markets holding strong in the west due to aggressive ethanol plant bids. Pekin, IL was indicated at 135 over the Sept for nearby corn. The CIF market was stronger as well with fresh export business hitting the US border. The Brazilian paper market slumped last week as the Real hit a fresh low against the Dollar and producer sales picked up significantly. The market has moved past the FSA data but many still expect a gradual decline in acreage by the USDA close to 2 million. At 95.4 million acres, a 157 bushel per acre yield, and all else unchanged from the August report, the carryout will come in at 1.78 million bushels vs. 1.84 by the USDA. The market is likely to hold a bearish bias with a carryout at this level given the questionable export demand going forward and hefty supplies out of the Black Sea and South America.
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