What Traders are Talking About:
Overnight highlights: As of 6:15 a.m. CT, corn futures are trading around 1 cent higher, soybeans are mostly 2 to 5 cents lower and wheat futures are fractionally to 2 cents lower. As has been largely the case in the absence of USDA data, two-sided trade is likely in grains again today. Cattle futures are expected to favor the downside, while hog futures are expected to open mostly firmer.
* China buys U.S. corn. A private Chinese firm purchased 420,000 MT (7 cargoes) of U.S. corn last week to take advantage of cheaper U.S. prices, an official with the unspecified company who bought the corn told Reuters. The corn is for delivery next year so the importer can take advantage of the new batch of low-tariff import quotas that will be issued for 2014. This year's quotas issued to private firms have been fully exhausted.
The long and short of it: It's not surprising to see Chinese firms buying U.S. corn as our price is around 20% cheaper than domestic Chinese prices. But strong and consistent demand is needed to spark buying interest in corn futures in the face of harvest pressure, especially with yield reports continuing to come in strong.
* Doubts about CME plan for October hog price settlement. CME Group announced yesterday it will closely monitor trading in October lean hog futures next week ahead of the contract's expiration to prevent price manipulation under the new settlement procedures announced Monday by the exchange. CME Group will use a volume-weighted price settlement procedure in the absence of USDA data needed to calculate the CME lean hog index, which is normally used for settlement at expiration.
The long and short of it: Industry sources are skeptical of the price settlement procedure. In addition to the potential for price manipulation, this settlement procedure does not take into account the cash market for what is typically a cash-settled contract. But under these extraordinary circumstances, CME Group feels this is the best way of fairly determining contract settlement.
* South Korea bans some U.S. beef. South Korea has halted U.S. beef imports from a Swift Beef Co. plant in Colorado, a unit of JBS USA, after traces of zilpaterol (Zilmax) were found in a 22 MT shipment from the company in late September, according to South Korea's Ministry of Food and Drug Safety. A ministry official says the country will sample all other beef shipments from the company and will randomly sample other U.S. beef imports.
The long and short of it: At the moment, this is not a major trade issue, but it could turn into a bigger deal if more U.S. beef shipments to South Korea (or any other Asian country) are found to contain traces of zilpaterol. From a market perspective, this should also have limited impact, but the cattle market has been known to blow these types of situations out of proportion in the past.
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