Ahead of the Open (VIP) -- December 20, 2013

December 20, 2013 02:18 AM

Corn futures are called 1 to 2 cents lower on Chinese rejection concerns.

  • Corn futures ended the overnight session mostly around a penny lower in lackluster trade.
  • Futures were pressured overnight by additional talk of Chinese corn rejections. Chinese quarantine officials say so far, 545,000 MT of U.S. corn has been rejected due to the presence of unapproved GMO material. That's right in line with what we reported earlier this week.
  • Traders are concerned the situation with China could be lengthy, although China was noted as a buyer in this week's export sales report, which signals they are still interest in buying U.S. corn.
  • Also this morning, USDA announced Japan has purchased 180,000 MT of corn for 2014-15.
  • Pressure on corn should be limited by position evening, especially funds that are net short the market heading into the holidays.
  • Gulf corn basis is steady to 1 cent lower for nearby delivery to stand 66 cents over March futures.


Soybean futures are called mixed amid bull spreading.

  • Soybean futures were choppy overnight, with the January through May contracts ending 1 to 2 cents higher while far-deferred contracts were fractionally to 3 cents lower. Meal was mostly firmer and soyoil was weaker amid spreading.
  • Mild strength in the U.S. dollar index is curbing buying enthusiasm in the commodity markets, which is limiting gains in nearby soybean futures to spreading.
  • Concerns that China's focus will soon shift to securing South American supplies are in the back of traders' minds and could limit buying interest moving forward, though China continues to actively buy U.S. soybeans.
  • January soybeans bounced off uptrending support yesterday to keep the short-term uptrend intact.
  • Gulf soybean basis is steady this morning to stand $1.00 over January futures for immediate delivery.


All wheat flavors are called mixed amid position squaring.

  • Wheat futures ended the overnight session mixed, with the most actively traded contraccts fractionally to 2 cents higher and far-deferred months mixed.
  • Upside potential is limited to short-covering, as funds hold a sizable short position heading into the end of the year.
  • Traders were impressed by yesterday's weekly export sales tally that came in well above expectations, but firming in the U.S. dollar this week raises concerns about the U.S.'s competitiveness on the global market.
  • Wheat futures posted another round of contract lows in overnight trade before being lifted by mild short-covering.
  • Gulf SRW wheat basis is 4 to 7 cents higher to stand $1.00 over March futures for immediate delivery. This signals more demand news is on the horizon.


Live cattle futures are called mixed as traders even positions ahead of this afternoon's Cattle on Feed Report.

  • Live cattle futures are expected to see a choppy tone this morning as focus is on evening positions ahead of this afternoon's Cattle on Feed Report.
  • The report is expected to show On Feed at 95.4%, Placements at 100.9% and Marketings at 94.6% of year-ago.
  • Trade officials say progress is being made on restarting U.S. beef trade with China, but a final agreement isn't expected until next summer.
  • Meanwhile, cash cattle trade picked up at $130 in the Southern Plains yesterday, which is $1 lower than last week after softer trade began in Nebraska on Wednesday.
  • Choice boxed beef values softened 47 cents yesterday and Select rose 40 cents to narrow the spread to around $9 premium Choice. Movement was light yesterday at 107 loads.
  • Weakness in the corn market is positive for feeder cattle futures this morning.


Lean hog futures are expected to be weaker due to plunging pork product prices.

  • Lean hog futures are expected to be weaker this morning on a combination of technical selling and sharp weakness in the pork cutout market.
  • The pork cutout value has declined sharply this week and dropped another $2.58 yesterday. Belly values led the decline. Movement was strong at 422.98 loads.
  • Packers have seen profit margins tighten this week, but they remain well in the black. Packers have incentive to keep kill lines running as full as possible, although market-ready supplies are plentiful.
  • The cash hog market is called steady to lower as packers have supplies secured well into next week.
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