Ahead of the Open (VIP) -- April 28, 2014

April 28, 2014 03:21 AM
 

Corn futures are called 2 to 4 cents higher this morning after similar price gains overnight.

  • Corn futures were mostly 2 to 3 cents higher overnight amid a cold, wet forecast for the Corn Belt, which will slow planting efforts this week. Strong spillover from the soybean market was also supportive.
  • Active planting progress was made in some areas last week, but traders are expecting overall corn planting to remain well behind the average pace in this afternoon's update from USDA.
  • The computer-generated National Weather Service forecast for May 3-7 calls for a continuation of below-normal temps. Above-normal precip is expected over the eastern Corn Belt, with normal to below-normal precip over the western Belt during the period. This suggests corn planting will remain slower than normal into the first full week of May.
  • Heightened tensions between Ukraine and Russia are also price-supportive as this could mean slowed shipments out of the Black Sea region, though that hasn't been the case yet.

 

Soybean futures are expected to open 8 to 20 cents higher this morning amid followthrough buying from Friday and the overnight session.

  • Old-crop soybeans were roughly 9 to 18 cents higher overnight, while new-crop futures were mostly 7 to 9 cents higher.
  • Tight old-crop supplies and talk China will return to the market for more purchases by summer fueled followthrough buying in nearby futures overnight.
  • Traders worked bull spreads hard in overnight trade. That's expected to continue into today's session.
  • New-crop futures are following nearby contracts higher despite forecasts calling for cold, wet conditions that will delay corn planing this week. The pull from old-crop futures is stronger than any concerns of corn acres switching to soybeans at this point.

 

Wheat futures are called to open 3 to 7 cents higher this morning, continuing the price tone set overnight.

  • Wheat futures finished 2 to 6 cents higher in the overnight session, with HRW contracts leading price gains amid drought concerns in the Southern Plains.
  • The driest areas of the southwestern Plains got very little precip over the weekend, while some rains fell on eastern areas. Traders are expecting another downtick in HRW crop condition ratings from USDA this afternoon.
  • There are also concerns in the Northern Plains as cold, wet conditions are slowing spring wheat planting.
  • Heightened geo-political tensions in the Black Sea region are also price-supportive as traders fear reduced shipments from the region, though that hasn't been the case yet.
  • Additional support will come on spillover from strength in soybeans and corn, along with weakness in the U.S. dollar index to open the week.

 

Live cattle futures are expected to open the week with a firmer tone.

  • Last Friday's Cattle on Feed Report was friendly, especially for deferred live cattle futures as Placements were below the bottom end of the guess range.
  • The On Feed category was slightly lower than the average pre-report guess, but buying interest in nearby contracts may be limited after steady to lower cash cattle trade in the Plains late Friday.
  • Traders will closely watch wholesale beef trade as they formulate cash cattle opinions for the week. Boxed beef prices were lower Friday and movement was light, suggesting retailers may have completed purchases for upcoming beef features.
  • Feeder cattle futures should pull some support from live cattle, though strength in corn may limit buying interest. Tight calf supplies remain a source of support.

 

Lean hog futures are called steady to weaker to start the week.

  • Lean hog futures finished poorly last Friday, which is expected to trigger followthrough selling interest this morning.
  • Cash hog bids are expected to be steady to weaker across the Midwest. While market-ready supplies are tight, packers are working with negative margins, limiting their willingness to actively bid for cash hogs.
  • The pork cutout value was another 64 cents lower Friday and packers moved only 217.21 loads of product on the day. Packers will want to see the product market stabilize before they actively pursue cash hogs with higher bids.
  • Price volatility is likely to remain high this week amid ongoing uncertainty with porcine epidemic diarrhea virus (PEDV).
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