CORN

Corn futures were softer overnight with weakness in beans pulling prices into the red.  Dec corn traded a 3 cent range between 4.11-3/4 and 4.14-3/4, and; March a 4 cent range between 4.16-3/4 and 4.20-3/4.  Talk of increased chances for rain in South America next week is creating headwinds for row crop prices and dragging beans 50 cents off of Sunday night’s highs, thus weakening the corn market.  Managed Money is still net long an estimated 246,000 corn.  The dollar made a new low overnight before correcting slightly higher.  Crude was mixed.  December is normally a quiet trading month, but with funds heavily net long row crops, any disruption to the technical and fundamental condition of the marketplace could create a knee-jerk reaction in the open interest balance in corn.  Rainfall looks to continue through much of Brazil with 85 to 90% coverage of up to 1.5”.  Argentina remains dry for the rest of the week with a front moving in over the weekend with amounts near the 1” level.  We’ll get Weekly Ethanol Stats today followed by Weekly Export Sales tomorrow reflecting last week’s holiday-shortened schedule.

SOYBEANS

Soybean futures fell back another dime overnight on follow-through technical selling following Monday’s bearish reversals.  The Jan bean contract got to 11.49-3/4 overnight while taking on a path of least resistance.  As much as 40% of South America’s soybean crop remains stressed by dry conditions and the trend in futures is still higher, but after having become technically overbought and unable to break above $12, we’re seeing Managed Money react by liquidating some long positions at this time.  Managed Money net long an estimated 180,000 soybeans; 64,000 lots of soymeal, and; 100,000 soyoil.  South America weather remains key to price action.  In January, trade with China should pick up before key USDA reports.  Plus we will have another month of South America weather and a new 30 day outlook.  Many doubt USDA will make many changes on the December 10 Supply and Demand report though estimates for the final U.S. soybean carryout could edge closer to a market-friendly 100 to 140 mil bu versus the latest 190 figure.

WHEAT

Wheat futures were up 2 to 4 cents overnight in a technical bounce after losing 25 to 30 cents in the first two days of this week’s trade.  Elsewhere, Euronext wheat extended losses on Tuesday to the lowest in nearly four weeks as futures saw more chart-based selling.  Managed Money is now net short an estimated 9,000 contracts of SRW wheat.  Whatever bullishness the market was hanging on to has been lost with prices sliding below their respective 50-Day moving averages for the first time in more than 3 months, all despite new lows in the greenback.  March Chicago wheat, at 5.80 is now finding near-term support at the contract’s 100-day MA at 5.71-1/2.  Higher Weekly Crop Ratings on Monday afternoon erased the 3% decline from the previous week.  Meanwhile, a break of the head-and-shoulders neckline support has ushered in additional technical selling, and though U.S. stocks are relatively tight, Black Sea wheat is still be shipped out.  In tender activity, Egypt bought 170,000 tons of Russian, Ukrainian wheat and Thailand bought 54,000t optional feed wheat.  Traders will be watching the upcoming Stats Canada report on Thursday, Dec 3.  Surveys are conducted in March, June, July, November and December to obtain information on seeded and harvested field crop areas, average yields, production and on-farm stocks at strategic times over the course of a typical crop cycle, which ranges from spring to late fall.

CATTLE

Cattle futures are called steady to higher following firmer trade on Tuesday supported by weakness in grains, a lower dollar, and firm equity markets.  Cash trade started slowly with some $110 trade in South and Western IA, then saw bids firm to $111 in the afternoon in some regions.   December options expire on Friday with most open interest around the $110 strike level.  This will keep the market choppy.  Choice Carcass values were mixed on the close, settling .28 lower to 243.40 and Select gained .65 to 223.08.  Carcasses saw little change from midday values.  Feeder cattle are trading above the key $140 level and are supported by weakness in grain markets and strength in the Feeder cattle index.  

HOGS

Lean hog calls are mixed after they failed to follow through on Monday’s rally because of weak front month fundamentals.  Heavy pork production and large slaughter run limits upside potential.  Estimated slaughter was at 497,000 on Tuesday, keeping pressure on cash prices.  The CME Lean Hog Index was lower, down .34 to 66.81 and are now at a discount to Dec futures, which will limit the upside with contract expiration on Dec 14.  Retail values were $8.00 higher at midday on Monday, but failed to hold those gains into Monday’s close and Tuesday’s carcasses were 3.01 lower to close at 77.08.  (Load count strong at 438 loads – highest in a week).  Talk that Chinese domestic pork prices are climbing, should support the demand side of the hog market, in the back month contracts.  

Author

Matthew Strelow