Grain traders are in a tizzy, wanting to buy corn as a hedge against higher prices as the U.S. crop withers in the drought-stricken southern Midwest, but a flagging global economy is reining in bullish enthusiasm.
The challenge is to weigh the bullish market implications from declining crop prospects against the bearish macroeconomic influences including downgrades of big banks, the ongoing euro zone debt crisis and at best a tepid U.S. economy.
Such opposing forces promise tense market positioning, frayed nerves and sleepless nights.
Wheat, corn and soybean future markets tumbled on Thursday with corn plunging 4 percent as investors sold off commodities and other risky assets after ratings agency Moody's downgraded 15 of the world's biggest banks.
But on Friday, agricultural markets bounced back and moved higher as meteorologists again warned that harsh weather would place further stress on corn and soybean crops.
Investors are braced for more volatility this week.
"Unless we get some decent rains soon the corn crop is in trouble. Come Monday with no rains, we could be sharply higher," a veteran Chicago Board of Trade trader said.
Condition ratings for the U.S. corn crop have shed 14 percentage points from good-to-excellent since the season began. The market is prepared for another 2 to 3 point drop in the U.S. Department of Agriculture's (USDA) weekly crop progress report on Monday...
Source: Argentine Beef Packers S.A.
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