Traders' Attitudes Firmly Set

November 27, 2013 12:09 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading around 2 cents higher, soybeans are 3 to 8 cents higher and wheat futures are 1 to 5 cents higher with SRW contracts leading price gains. Low-volume trade is expected today as traders wrap up positions ahead of Thanksgiving. Cattle and hog futures are expected to open with a mixed to slightly firmer tone this morning.


* Holiday trading schedule. Grain and livestock markets will observe normal trading hours today. All markets and government offices are closed Thursday for Thanksgiving. Grain and livestock markets will be open for an abbreviated session Friday, Nov. 29 -- from the normal start of open-outcry trade (there is no overnight electronic trade Thursday night/Friday morning) until noon CT for grains and 12:15 p.m. CT for livestock futures. I'm taking the day off Friday to spend with my family, so I will not be updating my column that day. I'll be back next Monday, Dec. 2, with my market commentary.

The long and short of it: Have a happy and safe Thanksgiving!

* Attitudes clearly displayed in corn and bean markets. January bean futures fought back from double-digit losses to end unchanged yesterday and are trading solidly higher ovenight. Meanwhile, corn futures closed in the lower end of yesterday's trading range and would likely be unchanged or lower if not for the price strength in the soybean market. Traders' attitudes toward these respective markets isn't hard to figure out -- they are bearish corn and friendly toward soybeans. Funds are clearly divided on their attitudes. Funds added to an already big short position by selling an estimated 9,000 contracts (45 million bu.) of corn yesterday, while they were flat (not net buyers or sellers) in the soybean market and hold a big net long position. The fundamental "reason" for their divided attitudes is demand. Corn demand is rebuilding but remains a concern. Soybean demand is strong and is being driven by China. Interestingly, traders brushed aside news yesterday that China canceled 300,000 MT of U.S. soybean purchases as that was offset by new sales of 360,000 MT of soybeans to an unknown destination. Traders are willing to look past record South American soybean production forecasts at this time.

The long and short of it: Funds' willingness to add to their short position in corn and not trim their long position in soybeans with a holiday break ahead signals they are firmly entrenched in their positions.

* China to auction massive cotton reserves. China will begin selling its massive supply of state-owned cotton reserves onto the domestic market Thursday and the weekly auctions will last through Aug. 31, 2014. The floor price is set at 18,000 yuan ($3,000) per MT for fiber from the 2011 crop, about 70% above the December cotton contract. Because the price is high and quality is unknown, China may struggle to find interested buyers. Therefore, there isn't as much concern about slumping Chinese demand for U.S. cotton as once feared.

The long and short of it: While Chinese textile mills may continue to import cotton, Indian supplies have a competitive price advantage over U.S. cotton.


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