Traders Cypher Fund-Weather-Yield Data Ahead Of Friday. The Corn & Ethanol Report

We kicked off the day with Redbook YoY at 7:55 A.M., S&P Global Composite PMI Final and S&P Global Services PMI Final at 8:45 A.M., ISM Services PMI, Factory Orders MoM, RCM/TIPP Economic Optimism Index, Factory Orders ex Transportation, ISM Services Business Activity, ISM Services Employment, ISM Services New Orders, and ISM Services Prices at 9:00 A.M., Fed Barr Speech at 11:00 A.M., Fed Barr at 2:30 P.M., API Energy Stocks, LMI Logistics Managers Index, and Total Vehicle Sales at 3:30 P.M.

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Ag Resources noted that option volatility in CBOT grain market fell to multi-year lows in all markets after the start of the year. But has begun moving higher in recent weeks. I believe this is the beginning of bulls jockeying for position to have their position and/or positions able to sustain some volatility with less risk before piling on more futures and options. Corn volatility this week at 22.2% is at the highest level since early September and 1.9% higher than a year ago. Soybean volatility at 18.2% is the highest since last August and is 5.2% higher than a year ago. Wheat volatility has remained elevated since the start of the Russian invasion of the Ukraine, but has also turned up. At 29.6% this week, it’s the highest since December, but 14% less than this time a year ago. CBOT grain markets are oversold with record or near-record net-short fund positions ahead of summer row crop planting season. Option premiums are rising but historically cheap. This could be another sign traders will look to buy value, hoping for a Bull Run!

South American weather forecasts are showing the monsoon is beginning to sputter. The EU & GFS models agree the South America rainfall. Soaking rainfall impacts most Argentine crop areas next week. Brazilian rainfall will be scattered in nature into the weekend, with the intensity and coverage of precipitation waning further in the 6-10 day period. It’s not a completely dry forecast, but a pattern of regional net soil moisture loss is ahead. Heat will be ongoing in Mato Grosso do Sul, Southern Mato Grosso, and parts of Goias. High temps will reach into the mid/upper 90’s. Overnight lows will exist in the low/mid 70’s. There is time for a pattern shift, but odds that regular soaking rainfall returns to Central and Northern Brazil begin to shrink after March 15th . The monsoon appears to be sputtering and ARC will also pay close attention to exact rainfall in E Argentina, where totals were pegged as high as 3-4” – which will slow harvest. Otherwise, the forecast is favorable for Argentine crop yields.

US forecast is wetter in the Eastern Midwest and Delta, while a pattern of net drying persists across the Plains. Temperatures will be more variable beyond today, following another round of record or near record highs yesterday, but above average readings will remain in place into mid-March. Forecasts have the Midwest high temps again reach into the 60’s March 10-12. Meaningful precipitation favors the east. Wildfires are likely to  spread and increase in intensity this week across Texas & Oklahoma with high winds and lingering dryness. Subsoil moisture across the Plains is normal relative to history, but the duration of dryness there needs monitoring. Precipitation in the last 30 days across N TX, OK, E NE, and ND has been recorded in a range of 18-60% of normal- Turnaround Tuesday at the CBOT with wheat pacing the correction. Ukrainian wheat exports in February are estimated at 2.5 MMT’s, a record for the month. Open interest in corn and wheat was up slightly, with hints of new long positions ahead of key Brazilian weather and ahead of wheat exiting dormancy in the North Hemisphere. Soybean open interest was down 1,500 contracts. Fundamentals remain strong as technicals remain intact with May corn not able to close above 434, the 20-day moving average.

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