Corn Fundamental Support: For the third Monday in a row, corn starts the week with a sizable kick higher. Once again to start a week corn is looking at a forecast which doesn’t offer much in the way of rain. Totals this week are expected between .25” and .50” of rain, all of which is expected to miss the Southern Midwest. This is the area the trade is watching the most. Through most of the day, the trade was looking for a good to excellent rating drop of 5% which was another strong reason for support. That GTE rating actually came in at 48% this afternoon, down 8%. Forecasts are trying to suggest a larger scale pattern change but that is not expected until next week. That change is calling for the high pressure to push far to the southeast allowing for a break in temperatures as well as more rain chances. This change is too far out in the forecast to gain much market attention for now. What we need to keep in mind is that trade might not wait to actually see rain falling before easing up on their long positions. If the forecast eventually includes a chance for solid rains then it will be likely that trade will sell first and ask questions later. While the overnight saw active trading volume, the “day session” was much more on holiday trading volume. We expect this lower volume trade to continue into tomorrow with trade ending at noon. Trade will not resume until Thursday at 9:30 AM. For the time being, bulls are still in charge of this market and even though they will take some profits from time to time, they are not likely to be longer term sellers unless there is a significant rain in the short term forecast…Ryan Ettner
Drought Rallies: The five most recent drought years are 2002, 1988, 1983, 1980, and 1976. Tonight’s chart shows the stats for each of those years, both the rally size and day of the peak. The average drought rally, from the initial price breakout, was 36%. The average rally lasted 87 days. Applied to the 2012 price breakout, that would project $7.25 December corn on September 13. Our official forecast, made on supply/demand/ending numbers, was raised on Friday from $6.80 to $6.95. That assumes yield falls to 145.3 by the end of the month…Rich Nelson
Soybean Fundamental Support: August soybeans finished 12 1/2 higher at 1494 1/4 and November finished 10 1/4 higher at 1438. We saw an export sale of 1.2 million tonnes of 12/13 delivery to an unknown destination announced at 8 am this morning from the USDA. This is the fifth largest export sale in history. There were rumors around the market today that this export sale was to Brazil to satisfy contracts they made that they could not fulfill with their production. This is probably not what happened but just gives you an idea of how bullish the trade has become. Good to excellent ratings came in at 45% which is down 8% from last week. The trade was expecting a 3% drop in ratings. Weather forecasts were helping to push this market today as the forecast is hot and dry for the next few days and with restricted rainfall the trade is continuing to look at a crop that is showing signs of stress. We saw the November contract come under pressure as the corn began to rally later in the session which leads me to believe the fund money is selling their soybean contracts in favor of corn. The trade knows good rains in late July and August will make the crop and with any sign of rain in the forecast we should see pressure as pod fill is the key timeframe and good rains still opens the door to a good crop…Cordon Sroka
New Highs: New highs were made today on continued yield concerns as well as this new overnight sale…Rich Nelson
Wheat Fundamental Support: The ever expanding drought continues to be the driving force behind the grain market rally. With the heat continuing for at least another week and a relatively low chance of rain, the bulls were quick to add weather premium to the market again today. We would anticipate wheat to find continued support until this weather pattern shifts. With the current price rally we are probably pricing ourselves out of the international market but the trade is more concerned about supply issues compared to demand. Additional support for the wheat came from a report that the IGC cut the world 2012/2013 wheat output by 6 million tonnes. They now estimate world production at 665 million tonnes. Crop ratings, released after the close, showed the winter wheat harvest is 69% complete. Last year only 49% of the crop had been harvested by the last week of June. The spring wheat crop continues to advance as 73% of the crop has been headed out. Last year only 12 percent had been headed out at this time of year. The report also showed that 71% of the crop was rated good to excellent. Both the electronic and grain pits will close at noon tomorrow for the July 4th holiday. There will be no night trade Tuesday and the market will be closed on Wednesday. The markets will open back up at 9:30 a.m. in the 5th…Jim McCormick
Production: With spring wheat ratings falling 6% this past week USDA may consider dropping production on the next supply/demand update (next Wednesday)…Rich Nelson
Lean Hog Fundamental Support: While the futures market has been focused on the bullish impact hot temperatures have had on supplies, lighter weights and reluctant marketings, we are still a little more concerned about its impact on the back end. Consumers simply don’t like to fire up the grill in 95 – 99 degree weather. That has been shown in four of the past five days of wholesale pork trading. We do respect the supply problem, certainly with how it impacts breeding herd performance and 2013 production, but expect demand to be curtailed here.
We are not going to join the bullish bandwagon here…Rich Nelson
Live Cattle Fundamental Support: A little weakness on the wholesale end has been seen in recent days. As with the hogs we assume heat is an issue affecting demand here. While there are clear problems with cattle performance in the Plains, as many customers have reported, it will take a couple more weeks before we can get a good grasp on just how hard finishing weights are going to fall. We still feel this market is in the sloppy process of trying to find a normal summer bottom…Rich Nelson
