Commodity Corner » 2007 » June

Hold tight: roller-coaster continues for CBOT grain markets

Christine Stebbins — Fri, 22 Jun 2007 22:02:04 +0000

Chicago Board of Trade grain and soy markets stayed all about the weather this week. When forecasters called for dry weather in the eastern U.S. Midwest, corn and soybean prices rallied. But by week’s end, parts of the eastern Corn Belt — notably Illinois, the top U.S. soy producing state and the No. 2 corn state, was benefiting from good rains.
Summer is always the most volatile time of the year for Chicago grain prices. But this summer is exceptionally volatile, which reflects large number of long positions held by big speculators and growing volume spread across two trading platforms: electronic screens and arm-waving pits.
There were many times, even a few years ago, when it was common for corn to spend an entire trading session in 1-cent range. On Tuesday, corn fell the 20-cent limit. The next day wheat jumped the 30-cent limit. Veteran floor traders, astute at making markets, struggled to keep heads above water.
Wheat prices also reacted to the weather. With global wheat supply projected at a 30-year low, more jitters about the U.S. winter harvest continued to jostle the market. The U.S. is not the largest wheat producer but is the largest exporter.
Mature winter wheat in the southern Plains was damaged by rains as harvesters tried to get the crop off the field. But weather late in the week was turning drier which should help improve harvest efforts in Texas, Oklahoma and Kansas.
Dry Midwest crop conditions were seen also stabilizing late this week, with corn and soybeans benefiting from scattered rains. The government will release updated condition ratings for the week next Monday. But all eyes will be on the USDA’s updated acreage report that will be released next Friday, June 29.
Talks was circulating this week on the trading floor that corn acreage will definitely be revised up. Ditto for soybeans, as a lot of drought-damaged soft red winter wheat grown in “double-crop” areas of the Ohio River and Delta states may have been plowed up and sown to more soybeans than usual.

Photo of Art Bunting in his corn field in Dwight, Illinois about 100 miles south of Chicago. Thte photo was taken by Mark Weinraub this week.

Wheat grabs Chicago grains spotlight; reaches 11-year top

Christine Stebbins — Fri, 15 Jun 2007 21:36:03 +0000

Wow, what a week. The feature was wheat, soaring to an 11-year high on worries that the size of the U.S. hard red winter wheat crop was shrinking due to relentless rains in the southern Plains, and a government forecast for global wheat stocks to reach a 30-year low by the end of the 2007/08 marketing year. It was so crazy that the premium for wheat relative to corn stretched above $2 per bushel — a rare phenomenon.
    “It’s just gone absolutely bananas. It went to $2 and there’s only been five times in history it’s been there,” said analyst Roy Huckabay with The Linn Group in Chicago.
    Next week will surely bring more volatility. If it stops raining in the southern Plains and farmers are able to resume the harvest, wheat could see a downward correction.
    If it stays wet, anything is possible, with some analysts thinking the price of Chicago wheat could take a run at $7.50 — the all-time high.
    “There’s not any reason for the market not to make a run at the all-time high at $7.50,” said Terry Roggensack with The Hightower Report. “The market is trying to price in the damage done to this soon-to-be harvested winter wheat crop.”
    Soybeans and soybean oil seemed to joined at the hip with Malaysian palm oil, rallying and collapsing with equal fervor. Track the moves in palm oil and it should be an indicator of soybean and soybean oil direction.
    By far, Midwest weather will be the driving force next week as the eastern Corn Belt is drying out and traders are building in weather premium into corn prices. The eastern Midwest is expected to be dry this weekend with light rains moving in early next week.
    “It will help but not turn the drier-than-normal conditions around,” Mike Palmerino, a forecaster with DTN Meteorlogix.
    Chicago traders expect the government to drop its ratings of the corn and soybean crops by 2 to 4 percentage points in the good-to-excellent category in Monday’s weekly crop update because of the dryness in the east.

(Photo: Corn field in central Iowa near Ames. Photo taken by Chris Stebbins the week of June 11.)

Summer growing season adds volatility to Chicago grains, soy

Christine Stebbins — Fri, 08 Jun 2007 21:36:35 +0000

The summer growing season is always volatile for Chicago grain markets but this one is keeping veteran grain traders on their toes. With the rising tide of speculative capital pushing into farm commodities, price swings have been more pronounced — even given a fairly benign weather outlook and strong crop condition ratings so far this season.
    Once again, soybean oil grabbed the spotlight this week. Prices rose to a 23-year high early in the week, then fell nearly 3 percent on Friday alone as traders cashed profits.
    Any time soyoil sees a sharp move, soybeans follow, with both tracking a volatile Malaysian palm oil market.
    Palm oil has been red hot on demand for edible oils led by Asia. But palm also saw its sharpest single day drop Friday on prospects that Indonesia would delay raising its veg oil export tax. The tax hike sent prices flying earlier this month on the outlook for tighter supplies.
    So the decks are clear for Monday’s monthly USDA reports. The government’s monthly world supply and demand estimates are due at 0730 Chicago time (1230 GMT) on Monday morning. USDA will also be updating U.S. winter wheat production.
    “The big things that people are going to be watching for are the wheat production numbers, for the intermarket spreads, and whether or not they raise the yield on new-crop corn,” said Charlie Sernatinger, analyst with Fortis Clearing America.
    Typically, USDA doesn’t touch its corn production guess in June. Yield estimates are based on historical trends and acreage until the first field surveys used in USDA’s August report. But traders say given the excellent crop ratings USDA has been reporting each week, the agency could lift its corn yield forecast.
    Most expected bearish corn numbers on Monday. But floor talk late on Friday was also that July corn prices could keep range-bound until July options expire June 22.
    “Based on what’s happening in options, it looks like corn will stay in the $3.60-$3.90 range until July options go off the board,” one options trader. Firms have been liquidating their July call and put options positions all week.
    On the wheat front, the consensus among analysts was for USDA to raise its U.S. winter wheat forecast by 25 million bushels after the crop saw plenty of rain this season. The USDA’s forecast will be based on June 1 wheat conditions.
    On the other hand, some traders said they had heard of disappointing early harvest yields out of Oklahoma. Winter wheat harvest is under way and will move north on the Plains and into the Midwest this month.
    Additionally, wheat bulls noted, global wheat stocks on Monday were expected to remain tight — at a 26-year low.
    Soybean data should be ho-hum. Stocks may be a little smaller but no big change is expected.
    Once traders digest the USDA data early in Monday’s opening session, the focus should return to the weather. Soils are getting dry in eastern Illinois, Indiana and Ohio with traders watching for the possibility of a high pressure ridge to move in the Midwest that could produce more dryness. That kept markets jumpy this week and will continue next week.

Volatility shakes Chicago grain and oilseed markets in week

Christine Stebbins — Fri, 01 Jun 2007 21:50:15 +0000

It was another week of volatility with several surprises for veteran Chicago grain traders, including the strength in July corn most of the week and Friday’s rally in soymeal, when commodity funds flushed more money into Chicago grains and oilseeds.
    But weather jitters were the biggest market drivers this week — everything from worries about dryness in the southeastern United States, some long-term forecasts calling for a high pressure ridge to move into the Midwest, dryness in eastern Europe’s wheat country and too much rain in the U.S. hard red winter wheat belt.
    “It’s all weather — world weather, especially in the U.S.,” said analyst Dan Cekander with Fimat USA in Chicago, referring to what will move the markets next week.
    Cekander is most concerned about all the rain in the southern Plains bread basket, where farmers are trying to harvest hard red winter wheat. It keeps raining, stalling harvest in Texas and Oklahoma and raising fears about crop loss and disease pressure.
    The concerns helped wheat futures buck a seasonal downward trend that occurs as the harvest expands.
    That said, traders will be focused on the latest weather maps and forecasts.
    “If it rains in the Southeast over the weekend it could stimulate some selling,” one trader said. But he quickly added that the soybean market is technically strong.
    Top soils are drying out in the eastern Midwest for the developing corn and soybean crops. According to the Midwestern Climate Center, top soils are especially dry in Ohio, Indiana and southern Illinois. But there’s plenty of moisture west of the Mississippi River — maybe too much, Chicago traders said.
    They are looking for USDA to drop its corn condition ratings by 1-3 points in Monday’s crop progress report from the current 78 percent good-to-excellent mark.
    Soybean ratings could be as high as 70 percent good to excellent.