It’s going to get hot in the US this week. Parts of the hard red wheat belt where farmers are busy harvesting or getting ready to harvest will be the hottest. Temperatures are expected to climb into the mid to high 30’s across much of Texas, Oklahoma and Kansas. Further north and east temperatures will also be high, 30C +/- 5C, across much of the corn belt. Apart from a few showers on Monday & Tuesday and then again on the weekend the map looks dry………..dry………. when it’s “dry” three wet days in a week kind of counters the “dry” doesn’t it. You have to love US based market reports.
The long term forecast for the Midwest is hot and dry, fancy that, a hot summer. We’ve already determined what the US forecaster defines as “dry”. So basically the corn and soybeans were sown into mud, it’s about to get warm during the growing season with a few showers. Not exactly a drought rally forecast is it.
Fund money continues to move in corn, soybeans and wheat futures according to last week’s CFTC report. The US farmer doesn’t mind, apparently every time the market rallies it is met with good farmer selling. So the farmer sells corn to a merchant, the merchant sells futures (if not physical), this covers the merchant for downside if prices fall. The other portion of the cash price left exposed is the basis, the premium or discount to futures paid to the grower. Buy low basis / sell high basis. It’s shaping up as a pretty good hedge really. Frances winter wheat crop rating fell 2% in the good to excellent end, now pegged at 79%.