Grains Have A Sell-The-Fact Reaction To Crimean Vote To Secede From Ukraine

March 17, 2014 01:05 AM
 

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 7 to 8 cents lower, soybeans are 8 to 12 cents lower in old-crop contracts and 4 to 5 cents lower in new-crop contracts, while wheat futures are mostly 8 to 12 cents lower in the winter wheat markets with lesser declines in spring wheat futures. Cattle futures are mildly favoring the downside and hogs are mildly firmer in light electronic trade.

 

* Crimea votes breaks away from Ukraine. Crimea's referendum Sunday showed overwhelming support to break away from Ukraine and become an independent state, as expected. This morning, the Crimean parliament formally applied to join Russia, which brought immediate threats of increased sanctions from the U.S. and European Union. Global markets, including grains, will keep a close watch on this situation as tensions in the region are rising.

The long and short of it: So far, the price response in the wheat market has been relatively muted. After an initial push higher in wheat futures, the market has set back in a "sell-the-fact" reaction. Still, the heightened tensions deserve some risk premium in prices.

* Crush pace will give good gauge of domestic soy demand. NOPA will report February soybean crush at 11 a.m. CT, with traders expecting the pace to slow to 140.9 million bu., according to the average pre-report guess. That would be down from 156.9 million bu. last month, but the highest February crush figure in four years. Strong margins gave crushers incentive to process as many beans as possible last month, but active export demand and poor weather presented some hurdles.

The long and short of it: The January crush figure came in much lower than anticipated and I expect the February figure to also miss the pre-report guess to the downside. USDA just lowered its crush projection and I expect that number to drop even more as soybean supplies become even tighter later in the marketing year and as meal demand slows due to PEDV.

* PEDV causes reduce kill schedule. Smithfield Foods has suspended Friday kills at its Tar Heel, North Carolina, pork plant due to reduced supplies because of PEDV. It's uncertain how long the reduced kill schedule will be in place, but with PEDV occurrences continuing to rise, it could be awhile before the plant returns to a full schedule. USDA hog slaughter data released Friday showed estimated U.S. hog kills last week down 2.1% from the week prior, down 7.7% from year-ago and year-to-date slaughter down 3.5% from last year.

The long and short of it: There have been rumors of reductions in the kill schedule at a couple of eastern pork processing plants, so it wouldn't be surprising to hear of other plants following suit with a formal announcement soon. In fact, I also expect some Midwest plants to start reducing kill schedules soon.

 

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