Two large factors provided market direction yesterday. They were 1. July
liquidation and 2. cooler and wetter forecasts. No doubt that dryness has
started to stress newly planted bean crops and older planted corn. After
starting with historically high ratings, the corn ratings dropped by 5% to 72%
good/excellent, bringing it in line with last year’s crop. Kansas and Kentucky
reported the worst conditions for corn. Soybean planting progress is about
2 weeks ahead of normal at 89% planted and 61% emerged, while winter
wheat conditions dipped slightly.
The macro picture continues to weigh on commodities across the board,
brining its fair share of weight to Ags as well. When combining a good weather
forecast with risk -off the table, the path of least resistance quickly becomes lower.
This morning commodities are lower with crude oil under $90 /barrel and gold
off as well. Concerns over the EU and China continue to hit the market in
episodes, driving money out of the commodities sphere. Last night was one
of those events, with Chinese agencies denying that they would add any
stimulus to their economy. China demand is synonymous with strong commodities,
hence any worries over this powerful economy can certainly provide a risk off pattern.
And adding to economic world worries was the fact that Spain’s credit ratings was
reduced to BB from a B ratings, with the Eurodollar at the lowest point for the year.
The trend towards the open for the pit session is lower for soy and wheat, steady
for corn which responded to lower than expected crop ratings:
beans: 5-9 lower
meal: 3.00-3.50 lower
oil: 20-25 lower
corn: 1/2-1 higher
wheat: 5-7 lower
Wheat futures may regain its previous bear -leg status from improving forecasts
in the Black Sea, and the fact that the enormous and quick short-covering rally
took prices to levels that were simply not world competitive.