Outlook from the CBOT Floor for June 25, 2012
For the week of June 25, 2012
Coming back from the weekend we have a real weather situation on our hands. Heat blooms over the central states will reach into the low 100s this week which adds severe stress to an already murky situation. Weekend rains did help in eastern NE, western IA and into western MO but there was nothing east of the Mississippi. Tropical Storm Debby looks to fizzle out over northern FL into the far SE corner of the US having minimal impact on weather in the central states. If anything, this will pull all gulf moisture to the SE of where is it needed leaving the central states under a high pressure dome that is subtle but building in size and severity. There is a chance for rains in northern plain states on the 8-14 day models but this is minimal and will not help the flooding situation in and around Duluth which is the driving factor right now in Minny wheat. This is a weather market like we have not seen in some time with world weather another contributing factor to the bullish potential of this market.
World weather is a mixed bag at best. Small increases in dryness in Argentina and Brazil stress winter wheat there while Ukraine finally admitted their problems this weekend. The Ukraine government weather forecaster stated Ukraine 2012 total grain production at only 43-44 MMT which is a 22% decline year on year. 12.2-12.3 MMT of this production is wheat versus 22.3 MMT last year. Just goes to show the problems are real. Russian wheat popped 10$/tonne over the weekend as supplies are stretched thin. Australia remains on the export sideline for wheat due to high domestic bids for feed consumption and problems in NSW through wheat germination. India remains the world’s bright spot for production but good luck getting it out of the country due to terrible logistical situations. They will export but not enough to rely on for SE Asian countries. This is just one reason EU wheat surpassed a yearly high overnight gaining 4.50 Euro/tonne. Dryness in Spain lowers total EU soft wheat production which squeezes currently ample supplies but we have all seen how quick wheat can explode. This market also holds a 50K short adding to upside potential.
The one bearish weather factor noted this morning is expectations for two rain systems in the Chinese north central plains. This would ease dryness in some of their major corn, cotton and wheat production areas. This rain if it hits on Weds-Fri would help them significantly.