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Outlook from the CBOT Floor for June 25, 2012

06/25/2012 @ 9:21am

The Grains Review
For the week of June 25, 2012
By Matthew Pierce

Coming back from the weekend we have a real weather situation on our handsHeat 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 MississippiTropical 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 statesIf 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 severityThere 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 wheatThis 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 bestSmall increases in dryness in Argentina and Brazil stress winter wheat there while Ukraine finally admitted their problems this weekendThe Ukraine government weather forecaster stated Ukraine 2012 total grain production at only 43-44 MMT which is a 22% decline year on year12.2-12.3 MMT of this production is wheat versus 22.3 MMT last yearJust goes to show the problems are realRussian 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 germinationIndia remains the world’s bright spot for production but good luck getting it out of the country due to terrible logistical situationsThey will export but not enough to rely on for SE Asian countriesThis is just one reason EU wheat surpassed a yearly high overnight gaining 4.50 Euro/tonneDryness in Spain lowers total EU soft wheat production which squeezes currently ample supplies but we have all seen how quick wheat can explodeThis 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 plainsThis would ease dryness in some of their major corn, cotton and wheat production areasThis rain if it hits on Weds-Fri would help them significantly

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