What Traders are Talking About:
Overnight highlights: As of 6:15 a.m. CT, corn futures are trading fractionally to 1 cent lower, soybeans are 3 to 6 cents higher and wheat futures are mostly 2 to 5 cents higher. A lack of fresh news and the absence of USDA data is likely to keep trading volume limited through the daytime hours. Cattle and hog futures are expected to favor a mildly firmer tone this morning.
* Wheat rally extends. The price recovery in the wheat market continues as traders factor in lower production potential in the Black Sea region due to planting problems and the likelihood that will lead to more demand for U.S. wheat down the road. Fundamentally, the wheat outlook is strengthening. The technical picture is also improving for wheat. After putting in a rounded bottom in August and September, the December SRW contract has firmed roughly 45 cents and broken the long-standing patter of lower highs. But bulls still have some work to do in order to swing momentum. The contract has not yet retraced 25% of the price plunge from the November 2012 high. That would be at $7.05, which lines up with the July high of $7.05 3/4, marking it as a key hurdle for bulls. But the real key is whether the contract can push above a 38% retracement around $7.42. Failure to do so would signal the price recovery is nothing more than a correction in a bear market. But clearing a 38% retracement would suggest the move higher is more than a correction and a potential trend change is in the works.
The long and short of it: Recent price action in wheat is more upbeat than it's been for a long time, but bulls are still far from capturing control. Consistent bullish news is needed to fuel an extended price recovery.
* October crop reports pushed back. USDA announced Monday it will not publish its October Crop Production and Supply & Demand Reports on Friday, as previously scheduled. Due to the government shutdown, USDA enumerators have been unable to gather data since the shutdown began on Oct. 1. Therefore, the report data won't be ready even if the shutdown ends prior to Friday (unlikely). However, USDA gave no date for when the report data will be released as it's uncertain when government employees will return to work. Reuters still released its pre-report expectations Monday based on its survey of private analysts. The average trade guess pegs the corn crop at 13.802 billion bu. on an average yield of 156.53 bu. per acre. In September, USDA estimated corn production at 13.843 billion bu. on a national average yield of 155.3 bu. per acre. For soybeans, the average trade guess is 3.156 billion bu. on a yield of 41.55 bu. per acre. Last month, USDA estimated the soybean crop at 3.149 billion bu. on a national average yield of 41.2 bu. per acre.
The long and short of it: With traders having to wait for USDA's October report data, they base more of their near-term trading decisions on the pre-report estimates and harvest results.
* CME offers alternative settlement plan for Oct. lean hog futures. CME Group announced yesterday it will alter its settlement procedure for its October lean hog futures contract, which expires Oct. 14, if USDA data used to formulate the CME lean hog index (cash index) is unavailable by Oct. 15 due to the government shutdown. Under that scenario, CME Group would calculate final settlements based on the volume-weighted average price of the October lean hogs futures contract for the two-day period of Oct. 11 and 14. The price would include both electronic and pit trade.
The long and short of it: A volume-weighted average price settlement for a contract that is normally settled against the cash index is not ideal, but it's a best means under the current situation.
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