U.S. acreage estimates, weather keep Chicago grain/soy markets busy

July 9, 2007

img_1437_resized.jpgChicago grain and soy futures continued to react to the shockingly big U.S. corn acreage figure and the cut in soybean plantings estimate that the government released on June 29. Corn rebounded during the week, getting a lift from worries that a hot weekend in the Midwest could stress the corn crop as it enters pollination.
Up until this weekend the summer growing season has been pretty mild. Even though there hasn’t been much rain the last few weeks, temperatures have been cool — limiting crop stress. Ohio and Minnesota are the driest spots.
Traders and analysts expect few, if any, changes to corn and soybean ratings in USDA’s weekly crop report that will be issued Monday afternoon. However, there are concerns that spring wheat ratings could fall after a hot spell in northern Plains.
Weather will be the key price driver this week, with corn the most vulnerable to hot, dry conditions. If corn gets a boost this week on weather jitters, soybeans will likely follow as the market is trying to encourage South American farmers to plant lots of beans.
The other market factor will be the July 12 USDA monthly crop report. The general consensus among analysts and traders is the agency will boost its 2007 U.S. corn production figure and cut its soybean crop estimate to reflect the June 29 acreage report.
USDA will also issue a U.S. wheat production figure. A closely watched analytical firm Informa Economics came out with its winter wheat production estimate on Friday which was lower than the USDA June forecast. The hard red winter wheat crop is seen shrinking as Oklahoma and Texas wheat keeps getting hit with rain. Wheat has been hovering at an 11-year high for over a week, supported by supply worries. But the market broke down technically last Friday and appears to be range-bound for now, analysts said.
Weekly trader data issued by the Commodity Futures Trading Commission, usually released on Friday afternoon, was delayed until Monday due to the Fourth of July holiday. The most obvious change is an expected jump in the net long speculative positions within the soy complex after last week’s buying spree sparked by USDA’s low soy acre estimate.
While veteran Chicago Board of Trade traders have been in the midst of a summer weather market, they’ve also been consumed with a bidding war between the Chicago Mercantile Exchange and IntercontinentalExchange for their exchange.
Up until Friday they were torn between the two bids. But the CME on Friday sweetened its bid to $11 billion for the world’s oldest futures exchange, swaying many trader/shareholders to vote for the CME deal on Monday. If the deal passes — combining the two largest U.S. futures exchanges — the CME would become the world’s top futures/options mart.

Photo: A soft red winter wheat field in Naperville, Illinois, 30 miles west of Chicago, where farmers chose to grow wheat — a hot cash crop — ringed by “McMansions.” Picture taken by Peter Bohan in Chicago on June 24, about a week away from harvest.

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