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Outlook from the CBOT Floor for July 2, 2012

07/02/2012 @ 10:39am

Friday saw the USDA confirm massive plantings for corn and beans at the expense of wheatNo real shock there but what needs to be discussed is the 500K increase in corn acreage but a decrease of 200K in harvested. That one flew a bit under the radar on Friday and is still under the radar for some reasonWe can plant everything we want, if it is not harvested it really doesn’t matter if this is the highest acreage since 1937Wheat acreage offers HRW and SRW a mild boost and this was supported by world wheat markets following the CME move higherA loss of 600K in acreage could change again if producers in drought areas till under double crop beans that never germinated or give up on corn in those same areas.

Stocks were neutral to bearishBeans and wheat were above the average guess while corn came in large enough to stave off immediate supply concernsThough bean stocks came in at the higher end of expectations, bean spreads were firm while corn spreads though strong remain on the defensiveInterestingly, overnight we saw CZ-CH dramatically tighten now sitting around 7.5 after touching 6 multiple times overnightBig move after holding the carry in recent weeksWeakness in corn spreads could be attributed to the crop in Ethanol bids across central statesMultiple facilities are slowing down or shutting down for “maintenance”Whatever the reason, corn basis remains weak to start this week while bean basis remains flat to slightly supported in the west.

Over the weekend there were rains in central IL, IN and OH but these were far too minimal to help. About 20% total coverage with high winds eliminating some of the moisture benefitExcessive temps, high winds and above average temps dominate the forecast with nothing seen rain wise a week plus in central statesThere is more rains expected in northern plain states and into the far upper Midwest but that is itThe southwest plains could see storms a week out but confidence is relatively lowTemps will moderate in IL and IN a week out but between now and then look for average highs in the upper 90s.

Overnight saw an explosion higher based on weather and positive world sentiment following the EU summitI understand the Euro is weaker against the USD and crude is slightly lower but taking into consideration Friday’s gains this is a minor downside consolidationThis market can now focus strictly on weather which is supportive worldwideAll commodities are trading off nightly highs but strength is trickling back in as traders approach the day session openingBean and meal bull spreads set the tone there. Corn spreads though weak in old/new crop scenarios, CZ is showing great strength versus CH13, CN13 and CZ13Wheat is weaker than corn with KC stronger than CHIThis is something to note because CHI has hammered KC recentlyKWU-WU is back at even valueI can’t explain nor justify this move but it’s something to remember because if the drought situation continues and double crop is a forgotten topic winter acreage will be there for SRW.

Looking to today, all markets will likely trade significantly higher with a chance to see some exaggerated upside move following mid day maps

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