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Weather ignites grains fireworks

07/06/2012 @ 1:58pm

The Fourth of July has come and gone, but fireworks are still being ignited for the commodity markets due to hot, dry weather.  The equities have rallied too.  The Dow is up 16.88 points as of Thursday to close at 12,896.97.  Oil has had volatile trade lately and as of this writing is up $2.18 a barrel this week to trade near $86.95.  Gold has gained $6.40 an ounce to finish trade at $1,605.30 today.  The dollar index has moved sharply higher as China and the European Central Bank cut interest rates.  Hot, dry weather continues to propel the agricultural commodities higher.

Corn is in a critical development stage and is beginning to pollinate in most areas. Hot, dry weather has ignited the 81 ½ cent rally this week to settle at $7.09 on the September contract today. As of Monday’s report, the corn crop was 25% silking and will be upwards of 40% on the next update. Last year, heat during this critical stage of development was the main reason for yield deterioration. Many of the top analysts have already made revisions lower to the anticipated yield and production and traders will be anticipating Informa’s estimates being released tomorrow. On July 11, the USDA will provide its updated estimates in the Crop Production and Supply/Demand reports.

Soybeans have rallied along with corn and is up $1.01 ¼ on the September contract to settle at $15.51 ½ today.  This market has benefited from the weather concerns as below average precipitation and above average temperatures have persisted for several weeks now.  The crop is in the blooming stage and was reported as being 26% in this stage as of the last report. Demand is still strong with export sales being well ahead of pace to meet USDA expectations. Revisions could come in next week’s report to anticipated export sales for the remainder of the year.

Wheat has spiked 79 ¼ cents on the CBOT September contract to settle at $8.37 ¾ Thursday. Production and export reductions from Russia and the European Union have helped the rally in this market. Winter wheat harvest was reported as 69% complete as of Monday which has done little to slow the rally.

Weather has been the spark that has ignited the fireworks in the grain markets in most recent weeks.  Corn and soybeans are in critical development stages and are susceptible to yield damage if the hot, dry weather persists through the pollination and blooming stages. Traders are eyeing tomorrow’s export sales report and the USDA Crop Production and Supply/Demand reports coming on Wednesday July 11.

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