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NEAR-TERM MARKET FUNDAMENTALS: The weekend brought hot weather across most of the Corn Belt and moderate to heavy rains from eastern Kansas into Iowa. All of this was unwelcome according to some analysts. Thunderstorms are expected to push into the central Midwest later today and that is also considered unwelcome. The most severe heat is concentrated in the eastern US at present, away from major growing areas, but some forecasts are calling for very hot weather next week after a cool-down in the central Midwest later this week and into the weekend. Mostly light shower activity is expected to slide through the western NW and central Corn Belt by Thursday with heavy showers developing by Thursday from Eastern Texas through eastern Oklahoma, NW Arkansas and into central and SE Missouri. The Commitments of Traders report for the week ending June 29th showed heavy net selling by funds. Trend-following (managed) funds were net sellers of a whopping 50,221 contracts to switch their net position back to the short side at 39,426 contracts. The reporting period ended on the day that the December contract posted its recent low at 343 1/4, just ahead of last week’s Acreage and Quarterly Stocks reports from the USDA. Non-Commercial and Nonreportable combined traders held a net short position of 118,390 contracts. This represents an increase of 48,507 contracts in the net short position held by these traders. The USDA will issue its latest Crop Progress report this afternoon, one day late due to the Independence Day holiday. Expectations are mixed, but some analysts are looking for an improvement through Sunday due to the season’s most extended period of dry weather and warm temperatures. Major corn growing areas in NE China have received substantial rain over the past two days. This was very welcome as dry conditions and above normal temperatures in that region in recent weeks had raised fears of a drought. Sales were down again this week on China’s weekly auction of corn with the peak in sales coming way back on June 1st. This week’s results were down both in the NE and in other regions. South Korea said today that it may increase the use of rice as feed due to an oversupply of that grain. On Friday, the December contract treaded water and posted its third close at just below the 100-day moving average. Overnight action took the December contract above last week’s highs to the highest level since May 28th.
TODAY’S GUIDANCE: The corn market continues to react to last week’s bullish Acreage and Stocks reports, with hot weather and a weaker dollar adding to that support as the crop begins pollination. The development of above normal heat during the weekend, with more heat expected in the long term forecast, may trim yield forecasts as this is occurring as the corn crop starts to pollinate in key growing areas. Nighttime lows will also be watched closely. If they remain above 80 degrees, this can seriously hamper the pollination process. One analyst noted that plant populations have increased in corn fields in recent years and that this increased concentration of vegetation raises the temperature in corn field above that of the surrounding air. He added that this could cause added stress and lessen the ability of the crop to cool down at night which is necessary for an optimal pollination. Trend-following funds may have gotten themselves trapped on the short side ahead of the USDA’s reports, and that could provide a foundation for significant fund buying ahead if weather is even mildly stressful and prices continue to advance. For example, if trend-following funds simply return to the 4-year mid point of their position in corn, this would be a switch the current net short position of near 40,000 contracts to a net long of 120,000 to 160,000 contracts. First light support is at 384 1/2 in the December contract with next support near 372. Next resistance is at 393 and 399.
TODAY’S MARKET IDEAS: The 2-3 day consolidation near the 100-day moving average along with supportive fundamentals points to further gains.
Corn Market Commentary – 2010.07.06
by Terry Roggensack on July 6, 2010
Below is a sample of our Daily Commentary. To get this comment, and our daily coverage of 15 additional markets and trade ideas, visit futures-research.com for your free 2 week trial!
NEAR-TERM MARKET FUNDAMENTALS: The weekend brought hot weather across most of the Corn Belt and moderate to heavy rains from eastern Kansas into Iowa. All of this was unwelcome according to some analysts. Thunderstorms are expected to push into the central Midwest later today and that is also considered unwelcome. The most severe heat is concentrated in the eastern US at present, away from major growing areas, but some forecasts are calling for very hot weather next week after a cool-down in the central Midwest later this week and into the weekend. Mostly light shower activity is expected to slide through the western NW and central Corn Belt by Thursday with heavy showers developing by Thursday from Eastern Texas through eastern Oklahoma, NW Arkansas and into central and SE Missouri. The Commitments of Traders report for the week ending June 29th showed heavy net selling by funds. Trend-following (managed) funds were net sellers of a whopping 50,221 contracts to switch their net position back to the short side at 39,426 contracts. The reporting period ended on the day that the December contract posted its recent low at 343 1/4, just ahead of last week’s Acreage and Quarterly Stocks reports from the USDA. Non-Commercial and Nonreportable combined traders held a net short position of 118,390 contracts. This represents an increase of 48,507 contracts in the net short position held by these traders. The USDA will issue its latest Crop Progress report this afternoon, one day late due to the Independence Day holiday. Expectations are mixed, but some analysts are looking for an improvement through Sunday due to the season’s most extended period of dry weather and warm temperatures. Major corn growing areas in NE China have received substantial rain over the past two days. This was very welcome as dry conditions and above normal temperatures in that region in recent weeks had raised fears of a drought. Sales were down again this week on China’s weekly auction of corn with the peak in sales coming way back on June 1st. This week’s results were down both in the NE and in other regions. South Korea said today that it may increase the use of rice as feed due to an oversupply of that grain. On Friday, the December contract treaded water and posted its third close at just below the 100-day moving average. Overnight action took the December contract above last week’s highs to the highest level since May 28th.
TODAY’S GUIDANCE: The corn market continues to react to last week’s bullish Acreage and Stocks reports, with hot weather and a weaker dollar adding to that support as the crop begins pollination. The development of above normal heat during the weekend, with more heat expected in the long term forecast, may trim yield forecasts as this is occurring as the corn crop starts to pollinate in key growing areas. Nighttime lows will also be watched closely. If they remain above 80 degrees, this can seriously hamper the pollination process. One analyst noted that plant populations have increased in corn fields in recent years and that this increased concentration of vegetation raises the temperature in corn field above that of the surrounding air. He added that this could cause added stress and lessen the ability of the crop to cool down at night which is necessary for an optimal pollination. Trend-following funds may have gotten themselves trapped on the short side ahead of the USDA’s reports, and that could provide a foundation for significant fund buying ahead if weather is even mildly stressful and prices continue to advance. For example, if trend-following funds simply return to the 4-year mid point of their position in corn, this would be a switch the current net short position of near 40,000 contracts to a net long of 120,000 to 160,000 contracts. First light support is at 384 1/2 in the December contract with next support near 372. Next resistance is at 393 and 399.
TODAY’S MARKET IDEAS: The 2-3 day consolidation near the 100-day moving average along with supportive fundamentals points to further gains.
Tags: Corn, Grains
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