Ahead of the Open (VIP) -- August 26, 2013

August 26, 2013 03:17 AM

Corn futures are called 15 to 25 cents higher on weather concerns.

  • Corn futures gapped higher to start the overnight session and ended it with gains of 13 to 20 cents. Funds are expected to ramp up buying on the open this morning, possibly extending overnight gains.
  • Traders are reacting to forecasts for oppressive heat and no rain for the heart of the Corn Belt this week.
  • Additionally, the NWS computer-generated forecast for Aug. 31-Sept. 4 calls for above-normal temps to continue, although some rain chances are in the forecast for the Upper and eastern Corn Belt. But the forecast calls for normal to below-normal precip for the western Belt.
  • Heat and dryness is reversing traders' attitudes that big crops get bigger. Our corn crop peg released Friday of 13.46 billion bu. with an average yield of 154.1 bu. per acre is also a reminder of that.


Soybean futures are called 40- to 60-plus cents higher on heat and dryness concerns.

  • Soybean futures ended the overnight session 40-plus to 60 cents higher on concerns about building heat and dryness across the Corn Belt.
  • This week's forecast calls for the potential of record heat for this time of year across the Belt, with little to no rain chances to increase stress. A strong heat dome has formed to block out needed moisture.
  • Additionally, the forecast for next week calls for above-normal temps to linger.
  • On Friday, we pegged the U.S. soybean crop at 3.158 billion bu. with an average yield of 41.8 bu. per acre.
  • November soybean futures gapped higher on the open and have sharply extended gains to further improve the technical posture of the market. Bulls' next object is contract-high resistance of $14.09 3/4.


Wheat futures are called 8 to 12 cents higher on spillover from corn.

  • All wheat flavors ended the overnight session with strong gains, ending mostly 9 to 12 cents higher on spillover from corn and soybeans.
  • But with little other positive news, gains in the wheat pit will be limited to spillover.
  • Meanwhile, the U.S. dollar index is choppy this morning but currently favoring a weaker tone, which is also supportive for wheat this morning.
  • But without fresh demand news, traders could resist rallying, even if corn continues to improve.
  • Traders are also waiting on crop progress data this morning, as they expect spring wheat harvest to continue to weigh on prices.


Live cattle futures are called to open higher based on supportive Cattle on Feed (COF) data.

  • Live cattle futures are expected to see a lift this morning after Friday's COF Report showed all categories on the bullish side of expectations.
  • The reminder of the tightening supply situation is especially supportive for deferred futures as cattle supplies will dwindle well into 2014.
  • Meanwhile, only light cash cattle trade in Nebraska and the Southern Plains was reported last week at steady prices with the previous week.
  • As a result, this week's showlist is expected to be up slightly, which puts more pressure on the boxed beef market to improve.
  • While the COF Report showed tightening calf supplies, feeder futures are vulnerable to pressure due to rising grain prices.


Lean hog futures are called steady to firmer on followthrough from Friday's gains.

  • Lean hog futures are called to open higher based on spillover from live cattle and followthrough from Friday's bullish reversal in some contracts.
  • Additional support is expected to come from the steep discount nearby contracts maintain to the cash hog index.
  • However, the cash hog market is called steady to weaker as packers have early week needs secured.
  • But the heatwave across the Corn Belt this week is stressful on animals and could reduce producers' marketing plans. This could force packers to raise bids as the week progresses.
  • Traders are also encouraged by Friday's 94-cent gain in the pork cutout market, which lifted packers' profit margins.
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