What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are narrowly mixed, soybeans are 7 to 12 cents lower and wheat futures are steady to 2 cents higher. Positioning ahead of Thursday's USDA reports may trigger light short-covering in corn and wheat, and profit-taking in soybeans. Cattle futures are expected to open slightly lower, while hogs are seen opening with a mixed tone.
* Heat and dryness continue to take a toll on crop conditions. USDA's weekly crop condition ratings showed 54% of the corn crop is rated "good" to "excellent" while 52% of the soybean crop is rated in the top two categories. That's down 2 points and 3 points, respectively, from the previous week. When USDA's weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), the corn crop dropped 4 points to 342 while the soybean crop declined 6 points to 336. Corn and soybean crop ratings were lower in many of the key Corn Belt states, with the top production state of Iowa leading the crop deterioration.
The long and short of it: Despite four straight weeks of declines in corn and soybean crop condition ratings, traders generally aren't concerned. There's still a general belief that the corn crop was largely "made" in July and early August, while there's time for late-season rains to "save" the soybean crop.
* More than price hurting U.S. corn exports. Private Chinese feed mills are being forced to find alternatives to U.S. corn as their 2013 import quotas for corn have been exhausted. Instead of being subject to a 65% tax if they exceed the corn import quota of 2.88 MMT, they are buying U.S. sorghum. Chinese feed mills have already bought around 800,000 MT of U.S. sorghum and those purchases are likely to exceed 1 MMT. Sorghum imports are not regulated by government quotas and prices are around 20% cheaper than Chinese corn.
The long and short of it: The Chinese import quota situation is yet another hurdle for corn as that market is already trying to recover lost demand due to the runup to record prices last summer.
* Aussie wheat crop smaller; Brazil needs more wheat. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) cut its 2013-14 Aussie wheat crop forecast to 24.467 MMT from 25.399 MMT previously, but that's still above 2012-13 production of 22.1 MMT. The bureau cited dry weather in key production areas of New South Wales, Queensland and northern Western Australia as the reason for the crop forecast downgrade. ABARES expects Australia to export 19.5 MMT of wheat in 2013-14, down from 19.8 MMT in 2012-13. Meanwhile, Brazil has granted mills an additional 400,000 MT of duty-free wheat import quotas through the end of November as a recent cold spell has hurt the Brazilian wheat crop and mills had already used up the previous 2.3 MMT duty-free wheat import allotment.
The long and short of it: The Brazilian news opens the door for more purchases of U.S. wheat, but while Aussie wheat production was mildly trimmed, global competition is going to remain strong through 2013-14.
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