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Crippling Heat Rallies Corn MarketPosted Friday, June 29, 2012, at 5:27 PM
While hot, dry Midwestern weather found humans seeking shelter from the sun, the corn crop was fighting for its life, and traders took notice. Instead of dedicating precious resources toward growth and reproduction, corn plants across the Corn Belt were forced to adopt emergency defensive measures against the unrelenting sun. With weather predictions showing little relief in the form of rain, corn buyers were energized, paying as much as $6.56 for December corn futures on Wednesday morning.
Traders shrugged off a USDA report released Friday which showed that farmers had devoted an additional 600,000 acres to grow corn this year. Instead, traders and farmers alike focused on the possibility that drought conditions might cripple large portions of the corn crop during its critical pollination phase, causing yields to fall as much as 80% in some areas.
As of Friday afternoon, December corn futures were trading at $6.34, up 80 cents (+14%) on the week.
Germany Warms to Euro Bonds
In as surprise move early Friday morning, Germany's finance minister Wolfgang Schäuble announced that Germany would support the issuing of eurozone bonds in an attempt to help bail out troubled banks in Italy and Spain. This move, supported by France, came as a shock to the financial markets since Germany had taken a strong position all week that such as move would not be supported. In fact, as recently as Wednesday, German chancellor Angela Merkel vowed that there would be no European-wide bonds "as long as I live."
The euro currency rallied sharply on the news, causing a rosier outlook for the European economy. The climb in the euro also correlated with a rise in all precious and industrial metals, crude oil and gasoline, as well as global stock markets.
Meanwhile, rising tension between Turkey and Syria contributed to a sharp $55 rally in gold and the massive $6.00 rise in crude oil prices.
Debby Floats Gas Market
Tropical Storm Debby swept through the Gulf of Mexico this week, crippling more than a third of the natural gas production in the Gulf of Mexico. Although only 12% of U.S. natural gas comes from the Gulf, prices often rise when production in that region is threatened. Natural gas prices rose to a four-month high on Wednesday as the storm reached its peak, with prices topping out just shy of $3.00 per million British thermal units. By midday Friday, the storm and market had settled down, with prices trading near $2.76.
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Alex Breitinger, a 2009 graduate of DePauw University, is a commodity futures broker with Breitinger & Sons, LLC in Valparaiso. He can be reached at 800-411-FUTURES (3888) or online at www.indianafutures.com.