Here comes the heat

Lets talk demand first before we address the heat on the way. Our weekly export sales report came out Thursday showing 309 t.m.t. of wheat was sold last week down 40% from the week prior. So, demand remains weak but trend following funds continue to buy back previously purchased positions that four weeks ago were a record 77 thousand shorts and entering this week 53 thousand shorts held. Monday's position sheet after this week's buying should show their short only about 38 to 40 thousand contracts. Funds that are covering shorts are not turning bullish yet but are no longer as bearish so their moving their portfolio from a record short to possibly a neutral position leaving more room for price strength, especially if corn and beans rally next week off weather concerns. Funds change in thinking from bearish to neutral and potentially bullish comes from a perception the recent over production here and around the world has ended and ending stocks inventories at record levels now, will begin to decline. The issues prompting the changing mind set is. The U.S. a major producer exporter planted 6 m.a.. less wheat. Canada's crop is called appreciably smaller due to record spring rains. European wheat producers are in the grips of a drought with Russia in their worst drought in 3 decades. Russia was the biggest seller of wheat last year cutting our exports big time. All this may turn the market fundamentally bullish at some point on the supply demand sheets but for now wheat's no longer bearish in the minds of funds. Corn exports were 678 t.m.t. up 35% from the week prior with key Asian countries in for 380 t.m.t. versus 245 the week prior and china in for 125 t.m.t. These are good numbers considering last week was the U.S.D.A. crop report and importers tend to sit on their hands waiting to see f they need to re-think near to long term buying strategies. Soybean sales were 666 t.m.t. twice market expectations with china in for 234 t.m.t. new crop year sales for September 1 on out were 558 t.m.t. with china in for 226 t.m.t. New and old crop year sales combined for 1.225 m.m.t. This shows an accelerated buying surge by importers and keeps us on pace for further cuts in ending stocks for corn and beans. Now to the heart of things. For the next 5 to 6 weeks, weather will be 99% of our pricing influence as corn and beans enter the yield determinant stage. You've noticed the last two weeks even outside market influenced is sidelined. On Monday corn will be 50 to 58% in the key pollination stage. Beans at 21 to 28% in the key pod setting stage. WXRISK.com the weather site sees a monster heat dome entering the southern deltas and Midwest with temperatures from 92 to 103 in the eastern and western Midwest grain belt states. One week of hot and dry weather scares the market higher but doesn't kill a crop. The issue here is WXRISK.com and almost all other key weather gurus see the heat dome lasting for 12 to 15 days with some saying up to august 10th. A two week stretch of little to no rain and high heat would create fear in the market that 500 m.b. or more for each crop could be lost at a time when we have record corn and bean demand lowering our ending stocks monthly. Traders fear that June's rain created a shallow root system, for corn and beans and lack of rain and intense heat would bake the topsoil with the roots unable to tap into the wetter subsoil as roots are on the surface. Essentially, June's heavy rains may end up being the grain crops demise. Weather markets are tricky. Weather satellite imagery runs 24-7. One buckle in the jet stream and the heat dome moves out after 3 or 4 days. If we come in Monday and they say models of weather software now have the dome to enter Tuesday but move out by Saturday, then a higher open Monday will fade Tuesday and Wednesday as much of the weather fear premium was built into this week. If we come in Monday and all the weather gurus are confirming the heat dome will enter and stay for 12 to 15 days or more, then a dramatic surge in the prices could accrue. Corn could rally 1.25 to 1.80 before month end with beans 2.10 to 3.00. Now, beans have a 70 cent limit the first limit day then 1.40 after that with corn starting with a 30 cent limit. So, markets can cover a lot of ground quickly.