Ahead of the Open (VIP) -- December 4, 2013

December 4, 2013 02:07 AM

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

  • Corn futures ended the overnight session fractionally to 1 cent lower following yesterday's gains to maintain the back-and-forth price action.
  • Traders are concerned about demand after news that China has now rejected five batches of corn totaling 120,643 MT this month, in addition to last month's 60,000-MT rejection. All of the rejected shipments contained an unapproved GMO variety.
  • While traders realize corn prices are back at "value" levels that are helping to rebuild demand, this roadblock raises concerns about China's demand for U.S. corn.
  • USDA announced a daily corn sales to Mexico totaling 167,750 MT. Of that total, 132,600 MT is for 2013-14, while the remaining 33,150 MT is for 2014-15 delivery.
  • Gulf corn basis is 1 to 2 cents firmer for nearby delivery this morning, which suggests exporters are in need of supplies.


Soybean futures are expected to favor a weaker tone this morning in a continuation of overnight trade.

  • Soybean futures ended the overnight session mostly 1 to 5 cents lower after posting gains earlier in overnight trade.
  • With little fresh news for the market to digest this morning, all signals point to another choppy day or price action.
  • The low-range close in overnight trade suggests bears have the advantage this morning.
  • Mostly favorable growing conditions across South America have traders shifting their focus to growing global supplies, which will limit buying in futures.
  • There are also rumors that because China has rejected U.S. corn (see above), there is an elevated risk of soybean sales cancellations.
  • Gulf soybean basis is steady this morning, which suggests supplies and demand are in balance.


Wheat futures are expected to be mixed this morning, with buying limited by strength in the U.S. dollar index.

  • All wheat flavors ended the overnight session narrowly mixed in lackluster trade.
  • This morning Statistics Canada updated its 2013 crop pegs, estimating the wheat crop at 37.5 MMT, which is much higher than traders expected.
  • Increased competition from our northern neighbors will limit strength to corrective buying this morning.
  • Also, slight strength in the U.S. dollar index doesn't bode well for market bulls as traders realize U.S. wheat is not as competitive as it once was on the global market.
  • Traders are also reacting to news that Russia's ag minister has growing confidence the grain harvest will hit the 90-MMT level.


Live cattle futures are called mixed amid light trading volume.

  • Live cattle futures are expected to see a choppy, lackluster start as traders wait on the cash market for direction.
  • No active bidding for cash supplies has been reported, although expectations are for at least steady bids given tighter market-ready supplies.
  • Packers may begin to bid for cattle more actively later today to secure supplies ahead of wintery weather that is in the forecast for later this week.
  • Choice boxed beef values slipped 6 cents yesterday and Select was down $1.53 on moderate movement of 188 loads.


Lean hog futures are called mixed as traders reevaluate positions.

  • Following yesterday's sharp losses, lean hog futures could see some followthrough selling. If selling interest is light early, however, short-covering, is possible.
  • Bears clearly have the near-term advantage as support levels were violated yesterday and nearby contracts are still trading at a premium to the cash index.
  • The pork cutout value slipped 90 cents and there is concern additional near-term price pressure will be felt on the product market given plentiful market-ready supplies.
  • Important to note is that ham prices dropped more than $2 yesterday, which suggests holiday ham purchases by retailers are likely complete.
  • Some packers are in need of additional supplies and foggy conditions across the country's mid-section is limiting movement this morning. This could result in some firmer bids for cash hogs, but a mostly steady cash tone is expected today.
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