Limited Market Reaction To Can-Kicking Deal

October 17, 2013 01:20 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are 2 to 3 cents higher, soybeans are 1 to 2 cents higher and wheat futures are mostly 3 to 5 cents higher. A firmer start is expected to the daytime session, but fund activity will be key in determining whether that strength is maintained. Live cattle futures are expected to open higher this morning after cash cattle trade got started at $1 higher prices late Wednesday. Lean hog futures are expected to face light profit-taking pressure.


* Kicking the can. Congress passed and President Obama signed a deal that ends the government shutdown and will keep the U.S. from defaulting on debt obligations. The measure funds the government through Jan. 15 at the Fiscal 2013 post-sequestration spending level and suspends the debt limit until Feb. 7. The Senate and House each agreed to reconcile their budget resolutions adopted earlier this year by Dec. 13. So really the measure just kicks the can down the road -- these issues will need to be addressed again early next year.

The long and short of it: U.S. stock futures have had a muted response to the deal, suggesting they already had an agreement factored in. The strongest response has been in gold and silver -- "safe-haven" markets that failed to find safe-haven buying during the government shutdown and rising tensions over the debt ceiling.

* USDA reopens, now what? USDA offices are back open this morning following the 16-day shutdown. USDA officials must now decide the fate of reports that were missed during the shutdown. At the top of the list will be the October Crop Production Report of which the fate should be known by the end of this week. Undoubtedly there will be some "holes" in data, especially daily data and possibly some of the weekly updates. It's unlikely USDA will (or even have the ability to) repopulate all of the data that was scheduled to be released over the past 16 days. For an in-depth look at USDA's decisions on its reports schedule, click here.

The long and short of it: A systematic release of the "missed" data would be ideal, although maybe not practical. If USDA does a massive data dump, some of that data will be lost in the shuffle. And there will be some "holes" in the data.

* China corn buys hit 1.2 MMT. China has purchased 20 cargoes (1.2 MMT) of U.S. corn so far this month, according to China-based private consulting firm Shanghai JC Intelligence Co. That's well above the 12 cargoes (720,000 MT) Reuters has confirmed through private sources. Shanghai JC Intelligence Co. says the purchases are for March through June shipment next year, but depend on the buying firms getting needed import quotas.

The long and short of it: Obviously, Chinese firms see current prices as "value" levels. The Chinese demand should help the corn market put in a low. At a minimum, it limits the downside.


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