Heat threat for corn coming?

End-of-day grains wrap-up for Monday July 14.

image credit: Kevin Dooley

Corn (CBOT:ZCU14)

Fundamental Support: It was an entire day session of light buying seen in corn today. It’s not entirely clear which factor offered the support if it is the abnormally cool current temps or the forecast for 4 days of above average temps on days 7 through 10. At first thought it would be more likely trade was slightly concerned to see the +8 to +10 degrees in ND, SD, MN and IA for days 7 through 10. So far that is just one forecast map with heat but in a market this heavily sold let’s stay prepared for what type of bounce could be seen even on small bullish news. This could be a scenario where corn growers will welcome the heat but traders will see it as a threat to the GTE rating and at least be light buyers.

Old crop traders:

  • September corn continues to run at a similar spread to new crop for the last week
  • How much corn is “dumped” ahead of the new crop harvest will be the key issue for September traders to watch

New crop traders:

  • The first heat “threat” was seen on the noon map today suggesting +8 to +10 degrees on days 7 through 10
  • This heat is located in an area that should not be pollinating when it arrives but this is still the first heat seen all summer
  • Trade spent the day looking for corn ratings to be unchanged, any heat would affect future ratings

Bulls:

  • Warm temps are still the main factor which could bounce this market quickest, keep a close eye on updates
  • Given how sold this market is a serious weather threat could mean a 30+ cent bounce, watch updates closely

Bears:

  • Today’s bounce didn’t come close to taking out yesterday’s highs which for now suggests a bounce worth selling
  • As previously mentioned, bears are likely to sell into the first weather bounce looking for it to dissipate on future weather map runs
  • Today’s bounce came on very low volume which should keep bears confident for now to continue selling bounces


Wheat (CBOT:ZWU14)

Fundamental Support: Wheat finished higher today on what we would only be able to call short covering as crop conditions haven’t changed much over the weekend. Friday’s report showed ample wheat stocks moving forward as we saw any losses in production in the winter wheat areas being offset by good production potential in spring wheat.

Export inspections were within trade estimates which is a good sign that we could start to see fresh exports of U.S. wheat start to pick up. Ratings are expected to hold steady this week and harvest is going to be close to 75% complete as no major weather issues should have been reported that would have hindered harvest.

Speculators are carrying about as large of a short position as we have seen in recent years. This suggests we could see some light profit taking as there may not be enough information to continue to push this market lower which could cause some sort of a small bounce on speculative liquidation.

  • Funds buy an estimated 5,000 wheat contracts today
  • Export inspections were 377,520 tonnes of wheat within trade estimates of 325-535,000 tonnes
  • Lebanon buys 7,000 tonnes of black sea wheat
  • Israeli 50,000 tonnes of wheat
 
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