"Life isn't about finding yourself. Life is about creating yourself."
  

-George Bernard Shaw

Weather, weather, the market is tired of seeing rain in the long term forecast and never making into the now. So now it is taking on a show me the rain attitude. June should rank as the driest since 1988, the second driest since 1936, and the fifth driest over 1895-2012 in the central US. This week should see several days of intense to very intense heat unfold, with upper-90s to mid-100s common. A cool front triggers some t-storms Friday-Saturday, but heavy rain is unlikely. Above-average to much-above-average warmth is likely to continue next week and while rain chances are slightly higher next week, uncertainty exists and heavy rain is not expected. Central/eastern Midwest and Delta crops are in dire need of moisture as months of below normal rainfall with intermittent heat have dropped the US soil moisture profile to its lowest 2nd lowest levels since 1895. The point is that time is running out for rain and the next 2-3 weeks are critical with the corn crop beginning to pollinate as the plant's moisture needs expand. Unfortunately, the forecasts are barren of any meaningful moisture for the central/eastern Midwest into July 4th.

Trying to figure the right price to hedge is an art more than a science in weather markets, because forecasts are not infallible. There is always someone who will try the science way and respected analyst Bill Gary of CIS, Inc., says that currant heat for the moment doesn't necessarily mean we're staring at a crop disaster, at least not yet. Since 1986, there have been 18 years when the crop rating ranged from 56 to 70% near June 17. In years of 63% or higher, the final yield fell below trend only two times. In years ranked 62% or lower, final yield fell below trend four times. Pollination is the most critical yield-determining period. The bulk of pollination in the Corn Belt typically occurs during the second and third week of July. Therefore, it is obvious from the table above condition ratings in mid-June are not a reliable indicator of final corn yield. For instance, in 1992 the crop rating was relatively poor at 59% in mid-June, but the final yield was 110.5% of trend. Conversely, in 2011 the rating was relatively high at 70% good/excellent, yet the final yield was only 92.6% of trend. This year, corn was planted very early throughout the US. Therefore, pollination will occur from one to two weeks earlier than normal. If weather is hot and dry during the last week of June and first week of July, it would be a strong indicator of yield below trend. Current high ratings are in states with fewer acres and lower trend yields. Lower ratings to date are in larger acreage states with higher trend yields. Consequently, it appears future ratings will continue to deteriorate. If we use the average of years rated from 56 to 62%, the percentage of trend would be 97.9, or 157.6 bushels per acre. Considering the foregoing table, expected early pollination, and the proportion of increased acres in states with typically lower yields, we are currently estimating yield at 158.5 bushels per acre, 2.5 bushels below the twenty year trend. Assuming yield estimates do not fall below 155 bushels per acre, our studies indicate a summer high for December futures in the area of $6.00 to $6.25.


So what are crop scouts saying about currant stress. Trusted scout Jim Gerlock said, with regard to US corn production, I would caution traders to pay very, very close attention to temperatures over the next couple of weeks. If moisture remains poor as expected, today's genetically modified corn hybrid can withstand moisture deficits much better if temperatures are not high enough to hurt the pollination process. I saw drought stressed corn last year do shockingly better than expected despite extreme temperatures during pollination and would expect to see yield outpace expectations this year as well IF temperatures stay in check. I want to be clear that I'm not forecasting trend line yields, but rather would expect yields somewhere between 150-160bpa nationally (see CIS estimate in grain section) if heat stays in check vs. last year's 147bpa figure. Remember that much of this year's crop will pollinate in late June/early July as opposed to the hottest part of the summer later in July/early August. Throw in the USDA's questionable 900mb increase in feed usage in 2012/13 and we have some room for crop losses in corn. However, that assumes the USDA doesn't surprise us with a lower than expected June 1st corn stocks report on Friday, something that some traders believe is inherently possible.


The US dollar is not relevant for grains today with the way weather has been pushed back and we are seeing a reset in grain value. Crude oil is toast as the US$ rallies, but for grains, it will look at the US$ when forecasts get boring. The US $ appears to have done a mid-month turn like we discussed last week and is heading higher into the first of a month for a high with Europe again in disarray.  


 

US Dollar Intraday Chart

December Corn Daily Chart

Last Wednesday we said the statistical odds favored beans going through 14.00, it took a few extra days but it did it. Soybeans struggled today against the unwind of the corn spreads because losses there are more immediate, and gained just slightly more than corn on the session. Soybeans should be well supported above 1395-1400 and the break-out does measure for a run above 15.00.We will wait for that potential, as beans have always seemed to surprise the market place in potential. Two weeks ago I had no new crop sales and had started because the market didn't seem to care, well now it does.




 

November Daily Bean Chart

Wheat

September wheat made it to the red line we discussed last week, so now what. Well it is obviously up to corn, because more wheat will get feed if less corn is perceived. Obviously if corn stumbles tomorrow, wheat will collapse. We will watch this one, as index funds could run this one another dollar if they moved it above 750 and can hold it.

September Chicago Wheat Daily Chart

  August Live Cattle Daily Chart

August Feeder Cattle Daily Chart

Gold

It is pretty obvious the gold was disappointed the FED didn't create a QE3 last week and the market retreated from the resistance we showed at the trend line. This chart is a pinball machine with the support evident in the 1530-1540 region. The price seasonal for gold doesn't turn up till September, so price action will remain choppy until the downtrend line is taken out, or support is violated.

Gold Daily Chart

 

Weeks ago we showed you a study that technically predicted that oil would trade at 79.00-80.00. Now that the price has been achieved we could still trade at 75.00 where support is very evident on the long term charts. With the US dollar likely to make a high by next week, oil is likely to make a turn back up with 75.00 holding on a closing basis.

                                              Crude Oil Daily Continuation Chart

06-25-12

NOTE: With the exception of livestock, all trades will be entered in the electronic markets unless otherwise noted. Hedge recommendations and Trade recommendations are totally separate, and may sometimes conflict with one another. It is strongly suggested that Spec trades and Hedge trades be done in separate accounts.   Heartland Advantage Ask about our State-of-the-art order entry software with LIVE quotes and charts! Free to all active clients of Heartland Investor Capital Management, Inc. A word to the Wise                             Past performance is not indicative of future results. The information contained in this report is intended for informational purposes only and is the opinion of the writer and may change at any time. This information was compiled from sources believed to be reliable to Heartland Investor Capital Management , Inc. but accuracy cannot be and is not guaranteed. There is no warranty, expressed or implied, in regards to this information for any particular purpose. There is SIGNIFICANT RISK of LOSS involved in trading futures and / or options on futures and may not be suitable for all investors. Investors should consider these RISKS and evaluate their suitability based on their financial conditions. No one should ever consider trading futures or options on futures with anything other than RISK CAPITAL . NO LIABILITY  on the part of the author exists for any trading loss you may incur in the use of this information. The information contained in this newsletter is privileged, confidential and protected from disclosure. Any further disclosure or use, distribution, dissemination or copying of this message or any attachment is strictly prohibited. Newsletter provided by Heartland Investor Capital Management, Inc. a registered CTA with the NFA, of which Eugene Graner is principal. This entity is a separate legal entity from the Introducing Broker Heartland Investor Services.

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