USDA Delivers No Major Surprises

December 11, 2013 12:27 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are 1 to 2 cents higher, soybeans are 2 to 3 cents higher, SRW wheat futures are 3 to 4 cents higher, while HRW and HRS wheat futures are 1 to 2 cents higher. Mild short-covering is being seen after yesterday's lower close. Cattle futures are expected to open mixed this morning as traders await cash cattle trade. Lean hog futures are also called mixed.


* USDA delivers few surprises. USDA's December Supply & Demand Report didn't provide any major surprises. While the U.S. corn carryover projection was lowered more than expected to 1.792 billion bu., the report served as a reminder that supplies will be plentiful through the 2013-14 marketing year. The cut to U.S. soybean ending stocks was right about in line with pre-report expectations, but there was a mild sell-the-fact reaction as the cut was already "in" the market. The biggest surprise was an unexpected uptick in projected U.S. wheat carryover. Combined with a 4.3-MMT rise in projected global wheat ending stocks, this will make it more difficult for the wheat market to find a low. Plentiful global wheat stocks are the real story in the wheat market as domestic carryover is projected to be the tightest since 2007-08.

The long and short of it: The only real bullish news was the cut to soybean carryover but that was widely expected.

* China rejects another cargo of U.S. corn. China rejected a 59,100 MT cargo of U.S. corn due to the presence of MIR 162 (Syngenta's Agrisure Viptera), according to customs officials. While MIR 162 is not yet approved for import into China, the real "reason" for the rejections may be that China has more domestic corn on hand, as China National Grain and Oils Information Center now forecasts this year's crop at a record 217.7 MMT. In yesterday's December Supply & Demand Report, USDA left its Chinese corn crop forecast at 211 MMT.

The long and short of it: Expect more rejections as there are nearly 2 MMT of U.S. corn currently en route to China. But the good news is that this is not lost demand as the shipments are being diverted to other Asian countries who have approved MIR 162.

* Winter's grip continues. Much of the country continues to be hit with bitterly cold temps and snow. Traders' concerns with winterkill problems with the winter wheat crop remain limited, however. While the arctic temps pose a threat, much of winter wheat crop areas are covered with an insulating blanket of snow and/or ice. Impacts to livestock are likely to be more pronounced, as weight gains will slow. But this is seen as a temporary issue and transportation hasn't been dramatically slowed thus far.

The long and short of it: The bitterly cold temps and snowfall is forecast to continue across the country's midsection into the weekend, though more moderate conditions are expected after that.


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