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Watching Outside Markets

00:00AM Sep 03, 2008

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Outside markets driving grain prices... Grain futures were hit hard yesterday by $6-plus-per-barrel losses in crude oil futures to start the week and sharp improvement in the dollar index. Crude oil futures trimmed initial losses, but still finished lower. Fortunately, Gustav did less damage to the Gulf oil infrastructure than feared, triggering widespread selling in crude oil futures which resulted in some chart damage.

Outside markets triggered heavy liquidation pressure in the grain markets, but corn and soybean futures trimmed losses into the close, to signal the potential for additional short-covering. The dollar also posted some technical chart improvement, remaining above the December 2007 highs.

Bottom line: Outside markets were the driving force in the grain markets coming out of the holiday weekend. Traders are also keeping an eye on the weather, which is beneficial for corn and soybean crops near-term, as remnant rains from Gustav are expected to provide crops with another much-needed drink during this critical grain fill period.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change::

Corn: 7 to 8 cents lower. Futures were lower overnight on spillover from yesterday's losses. Corn futures gapped sharply lower to start the week but trimmed losses into the close. Futures, however, still left a wide chart gap open on the charts. December corn left an 11-cent gap open on the charts. Tuesday's low of $5.56 is initial support, while resistance begins at the top of the gap area at $5.82.

Soybeans: 18 to 25 cents lower. Futures saw sharp spillover pressure in overnight trade. Futures closed sharply lower yesterday, but trimmed initial losses. Futures will continue to keep a very close eye on the weather and outside markets. Yesterday's price action left a wide gap open on the charts. Support for November beans lies at Tuesday's low of $12.56, followed by the August low at $11.74. To the upside, the top of yesterday's gap is at $13.18. If the gap is filled, the August high at $13.70 is next resistance.


Wheat: Mixed. Futures were mixed in overnight trade. Futures closed sharply lower yesterday, coming just slightly off session lows. Attitudes are getting more bearish in the wheat pit, with traders becoming more "comfortable" with global crop prospects. December Chicago wheat pivoted around support at the May low of $7.68 and closed just below that level. The next "landing area" for the contract is around the $7.00 mark.

Cash cattle expectations: Watching beef trade. Beef prices started the week under pressure, with Choice values down 59 cents and Select down $1.26. Movement was decent to start the week at 275 loads, but needs to improve in order to raise cash hopes. Feedlots are very current this week, as overall numbers are lower than last week's showlist.

Futures call: Mixed. Price action in the cattle pit is likely to remain choppy as traders wait on clear direction from the cash market. Traders are keeping a close eye on the beef market for direction. December live cattle need to climb above $107.50 to threaten the downtrending channel, while support lies at last week's low of $105.15.

Cash hog expectations: $1 to $2 lower. The cash hog market is called lower again today as packers work to keep margins in the black and supplies are plentiful. Pork cutout values slipped $1.60 yesterday.

Futures call: Mixed. Futures are called mixed amid spreading, and as traders keep an eye on the discount nearbys hold to the cash index. Upside potential will continue to be limited by continued cash deterioration. Yesterday, October lean hog futures came within 10 points of filling last Thursday's huge downside chart gap. If that gap is filled at $70.50, it would signal a short-term low has been posted.