Ahead of the Open (VIP) -- August 1, 2013

August 1, 2013 03:18 AM
 

Corn futures are called 2 to 5 cents lower on favorable near-term weather.

  • Corn futures closed out the overnight session with losses of 2 to 4 cents on favorable near-term weather forecasts and strength in the dollar index.
  • The National Weather Service (NWS) forecast for August 6-10 calls for below-normal temps across the Corn Belt, with most of the region expected to see above-normal precip, including dry areas of the western Belt.
  • Meanwhile, this morning's National Drought Monitor reflects expansion of drought in Iowa to include all but the eastern portion of the state.
  • Pressure on new-crop corn futures this morning should be limited by demand improvements. The drop below $5.00 in December futures has triggered value buying.
  • This was demonstrated by this morning's weekly sales report that showed new-crop purchases of 1,091,200 MT -- coming in well above expectations.
  • Meanwhile, USDA announced weekly old-crop sales of 134,000 MT.

 

Soybean futures are called to open 1 to 3 cents lower in new-crop futures while the August contract is called higher.

  • August soybean futures ended the overnight session around 7 cents higher, with new-crop futures fractionally to 3 cents lower.
  • Following yesterday's choppy day of price action, soybean futures didn't stray too far from unchanged in overnight trade and ended narrowly mixed.
  • Strength in the dollar index is limiting buying interest, although more focus is on favorable near-term weather forecasts.
  • The NWS forecast for August 6-10 calls for below-normal temps and above-normal precip for much of the Corn Belt. The forecast is seen as favorable for crop development.
  • Meanwhile, the drop in new-crop prices is attracting strong demand. USDA reported weekly export sales of 1,030,900 MT for 2013-14, which was well above expectations.
  • Weekly sales of 78,500 MT were reported for 2012-13.

 

Wheat futures are expected to favor a weaker tone on spillover from corn futures and a sharply higher U.S. dollar.

  • SRW wheat ended the overnight session mostly 3 to 4 cents lower, with HRW down 1 to 3 cents. HRS futures favored a firmer tone in mixed trade.
  • Upside potential in wheat futures will be limited by weakness in the corn market, although pressure should be limited by improved demand prospects.
  • Export sources say Brazil has purchased around 400,000 MT of U.S. HRW wheat and is shopping for more to fill in needs due to crop concerns and a shortage of Argentine exports.
  • Meanwhile, Ukraine's ag ministry forecasts a record-large grain crop this year and wheat exports are expected at 9 MMT.
  • This morning's weekly wheat export sales report showed sales of 596,900 MT, which was within expectations. China topped the buyer's list.
  • Strength in the dollar index this morning is adding to the negative tone in the wheat market this morning, as traders fear a strengthening currency will slow importers' interest in U.S. wheat, which is already priced above supplies coming out of the Black Sea region.

 

Live cattle futures are called to open mixed as traders wait on direction from the cash market.

  • Live cattle futures are headed for another choppy day of price action as traders wait on cash cattle trade to develop.
  • Traders remain comfortable with nearby futures at a premium to last week's cash market due to tightening supplies, but buying is being limited due to ongoing sluggish beef demand.
  • Choice boxed beef values slipped 46 cents yesterday and Select softened by a penny. Movement was moderate at 213 loads, though better than recent days.
  • This week's available cattle supplies are up slightly after feedlots didn't clear up showlists last week. That gives packers added bargaining power in this week's negotiations, although total numbers still remain tight.
  • Weakness in the corn market this morning is supportive for feeder cattle futures.

 

Lean hog futures are called to open mixed amid light short-covering.

  • Following yesterday's choppy day of price action, lean hog futures are expected to be mixed again as traders even positions.
  • August futures were supported yesterday by the discount the contract holds to the cash index. The contract still holds around a $2.50 discount to the cash index, which opens the door for more near-term price strength.
  • The pork cutout value firmed 40 cents yesterday and movement improved to 401.5 loads. This should also help to limit pressure on nearby futures this morning.
  • However, with market-ready supplies set to rise seasonally, buying interest is limited to corrective buying.
     
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