Drought still pushing grains higher

Livestock also feeling impact of heat

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


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