Ahead of the Open (VIP) -- August 28, 2013

August 28, 2013 03:22 AM
 

Corn futures are called to open 1 to 3 cents lower, but the market could see a choppy start on weather concerns.

  • Corn futures trimmed gains in late overnight trade to end the session mostly around 3 cents lower. Key this morning will be how comfortable funds are given weather concerns.
  • Concerns about next week's weather provided an early pop to prices overnight, which could inspire fresh buying at the start of daytime trade.
  • The NWS forecast for Sept. 2-6 calls for above-normal temps to continue, with below-normal precip expected across the bulk of the Corn Belt.
  • Still, corn futures have yet to confirm a near-term low has been posted, which is holding back funds from aggressively rebuilding a long position.
  • There is also talk that South Korea has recently increased its new-crop corn purchases, signaling prices are rebuilding demand.
  • But Gulf corn basis for immediate delivery is down a dime to stand $1.40 over September futures, possibly signaling a softening of demand.

 

Soybean futures are called to open mixed with an upside bias due to weather concerns.

  • Soybean futures favored a stronger tone overnight on weather concerns, but ended the overnight session mixed.
  • Weather models have turned drier for next week, with only spotty showers now in the forecast after this week's extreme heat.
  • Traders remain concerned about further yield losses this week after the Midwest Crop Tour revealed below-average pod counts in many states.
  • November soybean futures spent limited time in the overnight session above $13.80 and softened in late trade.
  • Also this morning, USDA announced a 120,000-MT soybean sale to China for 2013-14.
  • Gulf soybean basis is 5 cents softer for immediate delivery to stand $1.35 over November futures to signal a slight pullback in demand at higher prices.

 

All wheat flavors are expected to see a mixed start as traders gauge price action in the corn market.

  • SRW wheat ended the overnight session 2 to 4 cents lower, with HRW steady to 1 cent higher and HRS ended 2 to 3 cents higher.
  • Upside potential in wheat futures overnight was limited to short-covering, especially as corn futures softened in late trade. Wheat will continue to keep a close eye on neighboring pits for direction.
  • Strength in the dollar index is also a price limiting factor this morning.
  • Traders are also being reminded of more abundant global supplies. While down slightly from its previous estimate, grain trader Toepher International expects Germany's wheat crop to be 8.3% higher this year than last season.
  • Some fresh demand news from USDA could also provide a lift to the market this morning.
    USDA announced export sales of 119,000 MT of wheat for delivery to unknown destinations. Of the total, 22,000 MT is HRW and 18,000 MT is SRW for 2013-14, and 49,000 MT is HRW and 30,000 MT is SRW for 2014-15.
  • Traders are also waiting on results from an Egyptian wheat tender.

 

Live cattle futures are called to open mixed, with pressure limited by improvement in the beef market.

  • Following yesterday's slight losses, live cattle futures are expected to be mixed this morning on the possibility of some short-covering.
  • Upside potential will be limited by concerns about packer demand for cattle after many feedlots carried market-ready supplies over last week.
  • But slight improvement in the boxed beef market yesterday is a reminder of the overall tightness of supplies. Choice values improved 29 cents to $196.09 and Select rose $1.50 to $185.64. Movement was light at 142 loads.
  • Meanwhile, feeder futures are vulnerable to price action in the corn market. Concerns about hot and dry conditions across the Corn Belt will limit upside potential in feeder futures.

 

Lean hog futures are called steady to firmer on unexpected strength in the cash market.

  • Lean hog futures were stronger yesterday on news of some firmer cash hog bids due to extreme heat impacting marketings.
  • The cash market is called steady to $1 higher again today as packers work to secure late-week supplies.
  • Traders are also working to narrow the sharp discount nearby futures hold to the cash index.
  • But a seasonal uptick in supplies -- which will eventually come to the market -- will limit traders' willingness to build a long position.
  • Pork cutout values firmed 11 cents yesterday, with movement decent at 357.5 loads.
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