Ahead of the Open (VIP) -- December 16, 2013

December 16, 2013 02:16 AM
 

Corn futures are called 3 to 5 cents lower on demand concerns.

  • Corn futures ended the overnight session 3 to 4 cents lower on concerns about trade issues.
  • Mexico's ag ministry announced the country is restarting its import tariffs on corn at a rate of 20%. It's unclear whether or not this will apply to U.S. corn due to NAFTA, but given the country's large appetite for U.S. corn, uncertainty surrounding this situation is a source of pressure on corn this morning.
  • Traders are also concerned additional shipment of U.S. corn will be rejected by China this week as additional shipments are headed to the country.
  • Key will be if funds continue to lighten their short exposure to the market, which would limit pressure this week.
  • Meanwhile, Gulf corn basis is steady this morning to stand 70 cents over March futures for immediate delivery.

 

Soybean futures are called 3 to 5 cents lower on commercial selling.

  • Soybean futures ended the overnight session mostly 3 to 5 cents lower on stepped up commercial selling.
  • Traders are also reacting to news a case H7N9 bird flu was confirmed by Chinese health officials in the province of Guangdong. Traders will be watching to see if this is an isolated case, but too often the situation lingers and spreads, leading to a temporary reduction in feed demand.
  • The detection of GMO material in some corn shipments is also raising concern China will cancel some U.S. soybean purchases, especially since the country has large purchases on its books.
  • But a 2-cent gain in Gulf soybean basis signals fresh demand news is looming. Basis is $1.02 over January futures for immediate delivery.

 

All wheat flavors are expected to open under light pressure, with SRW leading losses.

  • SRW wheat ended the overnight session mostly around 4 cents lower, with HRW down 1 to 2 cents and HRS steady to a penny lower.
  • Wheat is seeing spillover from neighboring pits and needs a dose of fresh export news to stabilize the market.
  • Weakness in the U.S. dollar index is doing little to calm traders' fears about the competitiveness of U.S. wheat on the global market, but it should help to limit pressure.
  • Russia's ag minister says the country's wheat crop should account for 55 MMT of the country's 95-MMT total grain crop and it plans to increase state grain stocks.
  • Gulf SRW wheat basis is steady this morning to stand $1.00 over March futures for immediate delivery.
  • Traders are also focused on evening positions as many will be closing their books for the year this week and take an extended break between Christmas and the start of 2014.

 

Live cattle futures are called steady to lower on signs a short-term high has been posted.

  • Live cattle futures ended Friday slightly lower, but for the week posted slight to moderate gains. But weakness in the product and cash markets signals a near-term high may have been posted.
  • Traders point to last week's $1 lower cash cattle trade and signals retailers have completed their holiday beef buying.
  • Choice beef values slipped $1.56 on Friday to return below the $200 threshold. Select values firmed 39 cents. Just 134 loads traded hands on Friday.
  • All eyes will be on the beef market as traders gauge early week cash expectations. Feedlots will be hesitant to move cattle at lower prices this week due to stressful weather conditions.

 

Lean hog futures are called steady to lower on building market-ready supplies.

  • Lean hog futures posted slight to moderate losses last week, which is expected to attract followthrough selling this morning.
  • The cash hog market is called steady to lower as packers are having no difficulty securing supplies.
  • Pork cutout values slipped 88 cents on Friday to signal retailers have completed their holiday purchases. But if values stabilize or improve, it would signal retailers are gearing up for a round of post-holiday features.
  • Friday's expiration of the December contract puts February in the lead-month role to follow the cash market more closely. This opens significant near-term downside risk for the contract.
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