What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are steady to 1 cent lower, soybeans are mostly 5 to 7 cents lower and wheat futures are narrowly mixed. Choppy to weaker trade is likely to continue, though overnight price action hasn't been a good predictor for the daytime session recently, especially in the soybean market. Cattle futures are expected to open with a mixed tone. Lean hog futures are called steady to firmer.
* China corn rejections more than a market focus. Much of the attention regarding Chinese rejections of U.S. corn due to the presence of a GMO trait China hasn't approved has been market-based. And from my perspective, that will remain the primary focus. But there's also the political side of the issue. The office of the U.S. Trade Representative (USTR) said they are "closely monitoring" the situation. "We have raised concerns with Chinese officials regarding increasing delays in the approval process for biotech events," a USTR spokeswoman said. "Our expectation is that biotech approvals will be handled in a timely and predictable manner, through a transparent, science-based process."
The long and short of it: The longer this issue lingers, the higher the odds it will take on a political greater political hue. This subject is expected to be raised in talks between the countries in Beijing this week.
* Soy demand remains strong. Chinese soybean purchases have gotten the bulk of the attention on the soybean demand front this fall, and deservedly so. But exports aren't the only source of strong demand in the soybean market. NOPA reported yesterday November soybean crush totaled 160.1 million bushels. While that was lower than expected (161.3 million bu.), it represented a 2% increase from October and was 1.8% higher than November 2012. Strong crush margins and a plentiful supply of new-crop beans is keeping encouraging crushers to process as many soybeans as they can get their hands on.
The long and short of it: There's no doubt soybean demand -- exports and crush -- is front-loaded. As supplies tighten later this year, the demand pace will level off.
* FOMC meeting begins. The Federal Open Market Committee will begin its two-day meeting today. With no change coming in interest rates, the committee's focus will be on whether to taper the central bank's $85 billion per month in asset purchases. Recent economic data has been more upbeat and shows the economy is strengthening, especially the jobs market, which the Fed has been identified as one of its keys in determining when to taper. That's likely to spark more support for easing the monthly bond purchases, but odds favor everything remaining status quo.
The long and short of it: The pendulum is swinging toward tapering sooner rather than later, but I don't expect it to start yet.
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