What Traders are Talking About:
Overnight highlights: As of 6:10 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are around 2 cents lower in all but the May contract that is fractionally higher and wheat futures are 1 to 4 cents lower with the winter wheat markets leading declines. Cattle futures are mixed with a slight upside bias and hog futures are under pressure.
* HRW crop continues to deteriorate. USDA delayed the release of its national crop condition ratings by one day until this afternoon. But individual states released crop ratings Monday afternoon, which showed continued deterioration of the HRW crop. In Kansas, 27% of the crop is now rated "poor" to "very poor," up two percentage points, while the portion of crop rated "good" to "excellent" dropped three points to 29%. In Oklahoma, 48% of the crop is now rated "poor" to "very poor," which is up four percentage points from last week while 15% is rated "good" to "excellent," down two points. In Texas, 61% of the crop is now rated "poor" to "very poor" and 13% is rated "good" to "excellent," each up two points from week-ago. Click here for a more detailed report.
The long and short of it: Traders are well aware of the drop in HRW crop ratings through winter, so any decline will need to be stronger-than-anticipated to be price-supportive. Based on recent price action, traders are betting spring rains will "save" the crop, though recent rain events have generally missed the driest areas.
* El Nino odds building. The Australian Bureau of Meteorology now puts greater than 70% odds El Nino will develop this summer. In its latest update the bureau says Pacific Ocean temps (surface and sub-surface) "have warmed considerably" in recent weeks, signaling a rapid transition to El Nino. Most models used by the bureau signal continued warming of Pacific waters in the coming months, with reading reaching El Nino thresholds by summer.
The long and short of it: Most meteorologists agree with the Aussie scientists -- an El Nino is building. But some warn that this time of year is known for lower performance in forecasting El Ninos.
* U.S. beef could lose in Japan/Aussie trade deal. Australia and Japan announced they will sign a bilateral trade agreement that is expected to take effect early in 2015. Under the accord, Japan would lower its tariffs on Australian beef, now at 38.5%, to 19.5% for frozen beef and to 23.5% for chilled beef, though Japan can return beef tariffs to 38.5% if imports from Australia exceed certain limits. U.S. beef exporters could lose as much as 80% of their sales in Japan unless the U.S. government reaches a similar agreement, according to Japan's ag ministry. Some of that is a tactic by Japan in an attempt "force" a similar trade deal with the U.S., but it's also a reality that U.S. beef trade with Japan will suffer if we don't sign a trade accord.
The long and short of it: Japan is a critical market for U.S. beef so this is a potential big blow to the industry. Exports to the country have gradually rebuilt since being cut to virtually nothing following the 2003 BSE situation in the United States.
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