Ahead of the Open (VIP) -- August 16, 2013

August 16, 2013 03:15 AM
 

Corn futures are called 3 to 5 cents lower on a pullback from yesterday's gains.

  • Corn futures ended the overnight session 3 to 4 cents lower on profit-taking following yesterday's gains.
  • Selling interest should be somewhat limited by forecasts calling for normal to above-normal temps and few precip chances through the 10-day window. Given that forecast and dry conditions, traders are showing some concern about kernel abortion.
  • Fund activity with be key to price action today. Funds bought a net 22,000 contracts (110 million bu.) of corn and have purchased a net 34,000 contracts (170 million bu.) of corn this week as they've covered some of their record short position. Funds must remain on the buy side of the market for corn to extend the modest price recovery.
  • Traders will pay close attention to midday weather updates as they position themselves ahead of the weekend. If forecasts remain as they currently are, some late buying interest may develop, though attitudes are still generally negative.

 

Soybean futures are expected to open the daytime session 2 to 4 cents lower.

  • Soybean futures ended the overnight session 1 to 4 cents lower in all but the September contract, which was 1/4 cent higher.
  • Soybeans are at risk of profit-taking pressure to close out the week after rallying more than $1 from last week's lows.
  • But forecasts calling for normal to above-normal temps and a lack of precip through the 10-day window should limit buying interest. Traders are concerned the building heat along with continued dryness will curb yield potential.
  • With focus on weather and crop prospects, traders will closely monitor midday weather updates. If they continue to call for heat and dryness, late buying may surface.
  • USDA announced China bought 284,000 MT of soybeans for 2013-14 delivery this morning. Unknown destinations also bought 126,000 MT of new-crop soybeans. This should also limit selling interest.

 

Wheat futures are called 1 to 3 cents lower this morning

  • Wheat futures ended the overnight session steady to 2 cents lower as corrective buying seen yesterday dried up.
  • Corn and soybean futures provided pressure on wheat overnight and that spillover pressure is expected to continue this morning.
  • The wheat market continues to struggle amid concerns U.S. wheat is overpriced on the world market. While export demand so far in the 2013-14 marketing year has been strong, traders are concerned about competition from the Black Sea region as exportable supplies there are up from year-ago and they are willing to undercut the U.S. on price.
  • South Korea bought a total of 73,300 MT of U.S. wheat overnight, but major purchases have been absent.

 

Live cattle futures are called to open slightly higher. Feeder cattle are also expected to favor the upside this morning.

  • Live cattle futures are expected to be supported by bullish cash cattle hopes, though nearby futures already hold a premium to last week's cash trade, which should limit buying interest.
  • While traders are still waiting on cash trade to develop, they feel packers will pay at least $1 more than the $121 they paid for cash cattle in Texas and Kansas last week.
  • The boxed beef market is also showing signs of finally putting in a seasonal low. Boxed beef prices were 95 cents to $1.01 higher yesterday, though packers moved only 129 loads of product on the day.
  • Feeder cattle futures are expected to pull support from live cattle and pressure on the corn market.

 

Lean hog futures are expected to open mixed to mostly weaker.

  • Lean hog futures softened yesterday following strong gains earlier this week. Followthrough selling is likely this morning, though the big discount futures hold to the cash market may limit selling interest.
  • Cash hog bids are called steady at most Midwest locations this morning, but traders fully expect the cash market to soften soon as supplies begin to build seasonally.
  • Pressure on the pork product market is also softening packer margins, which could curb demand for cash hogs. The pork cutout value was 71 cents lower Thursday.
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