Crop Condition Decline, Tight Chinese Corn Stock Spur Overnight Gains

September 20, 2011 01:37 AM

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Overnight highlights.

Following are highlights of overnight trade and opening calls:

Corn: 7 to 9 cents higher. Corn extended yesterday's late-session rally overnight, with additional support coming from talk about Chinese corn imports and weakness in the U.S. dollar. Corn prices softened enough to spur talk China is interested in buying U.S. corn to tame inflation and to supplement tight stocks. Followthrough buying and a high-range close today would signal a near-term low has been posted.

Soybeans: 10 to 14 cents higher. Futures were stronger overnight on spillover from corn, as well as recognition the corn:soybean ratio is out of whack. Additional support came from yesterday's condition report, which showed more deterioration in the crop than traders' expected. Our weighted Crop Condition Index revealed the crop declined 3.8 points to 337.42 (0=failure, 500=perfect) after posting slight improvement the previous week.

Wheat: 7 to 10 cents higher. Futures are in a follower's role, finding spillover from neighboring pits and dollar weakness. Traders also acknowledge wheat has some catching up to do with corn, but are comfortable with the discount structure given lackluster demand for U.S. wheat.

Live cattle: Mixed. Futures are called to open mixed amid spreading, but upside potential will be limited by the early start to the cash market. Cash cattle trade was reported in the Southern Plains yesterday at $116.00, which is down a dollar from the bulk of last week's sales. Producers moved last week's leftovers, as only light trade was reported late last week. In order to stabilize the cash market, price improvement is needed in the boxed beef market as packers' profit margins have tightened.

Lean Hogs: Mixed. Futures are called mixed amid spreading, but downside risk should be limited by strength in the cash market. Packers have seen profit margins tighten, but remain in the black thanks to slight improvement in the pork cutout market. The cash market is expected steady to firmer again today amid strong packer demand as they work to fill this week's needs.

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