China Rejects First Shipment Of U.S. DDGs

December 26, 2013 12:19 AM

What Traders are Talking About:

Overnight highlights: There was no overnight trade coming out of Christmas. Grain markets reopen at 8:30 a.m. CT, while livestock trade resumes at 9:05 a.m. Light and choppy trade is expected this morning.


* China rejects first U.S. DDG shipment. China has rejected 2,000 MT of dried distillers grains (DDGs) due to the presence of MIR 162 (Syngenta's Agrisure Viptera), a GMO trait that the country has not yet approved, trade sources told Reuters. This is the first rejection of U.S. DDGs by China, but more are expected as quarantine authorities have reportedly stepped up inspections and are now testing all shipments of U.S. DDGs. Asian trading houses say they have asked exporters to halt shipments of U.S. DDGs out of concern about major rejections.

The long and short of it: While shipments of U.S. corn that are rejected by China have been moved of other Asian destinations, it will be harder to find a new home for the DDG shipments. This is another headwind the corn market faces in trying to put in a low.

* Chinese outlook: Slightly lower GDP, steady land and food policies. China's full-year GDP is expected to come in at 7.6%, which would hit the government's target, but would be down a tick from 2012. China is expected to set its economic growth target at 7.5% for 2014. Meanwhile, China will stick with policies to maintain food self-sufficiency and protect farmland from urban encroachment, dousing speculation that new reforms would give the market a bigger say in food supply and rural development.

The long and short of it: While China has new leadership, it appears there won't be major changes in the year ahead. There has been some hope that the new (and younger) Chinese leadership would spur some immediate changes in the country.

* Quiet trade expected. Price action was light and choppy ahead of Christmas and more of the same is expected today and Friday. Some (many) traders will take an extended holiday break, meaning trading volume is expected to remain low to close out the week. Much of the price action the rest of this week and early next week is likely to be year-end positioning as traders wrap up their books for the year. That could lead to short-covering in corn and wheat, and long liquidation in soybeans, though traders have shown a limited willingness on that front so far.

The long and short of it: Low trading volume typically means light and choppy trade, but it can lead to increased volatility as it doesn't take as much to get the market moving in thin trade.


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