Ahead of the Open (VIP) -- December 18, 2013

December 18, 2013 02:15 AM
 

Corn futures are mixed to lower in lackluster trade.

  • Corn futures ended the overnight session marginally lower after a choppy overnight session that featured little net change in prices.
  • Traders will begin to more actively even positions as many will take an extended break between Christmas and the New Years holidays. Funds remain net short the corn market and the market was lifted by light short-covering yesterday.
  • Buying in the corn market, however, has been limited to position squaring amid concerns there could be political impacts of the unapproved GMO corn situation with China.
  • News reports signal the tonnage is higher than previously thought. China has reportedly rejected 500,000 MT to 600,000 MT (nine to ten cargoes) of U.S. corn since mid-November.
  • Gulf corn basis is steady to 1 cent weaker this morning.

 

Soybean futures are expected to continue choppy overnight trade and open narrowly mixed.

  • Soybean futures ended the overnight session narrowly mixed amid light trade.
  • Price action was muted overnight as traders keep an eye on outside markets ahead of the conclusion of today's Federal Open Market Committee meeting.
  • There's little fresh news for the soybean market to digest this morning, but lackluster overnight trade has been followed by fresh buying in daytime trade in recent days.
  • Key will be if funds are net buyers of soybean futures again this morning, as the January contract is trading in the upper portion of the recent trading range.
  • Gulf soybean basis is steady to 1 cent lower for nearby delivery to suggest a softening of demand that is typical around the holidays.

 

All wheat flavors are called 2 to 4 cents lower on followthrough weakness.

  • SRW and HRW wheat ended the overnight session 1 to 4 cents lower and HRS saw a narrowly mixed finish.
  • Wheat futures did more technical chart damage yesterday, which keeps bears clearly in control of the market. But some short-covering is possible this morning given the fact funds hold a large net short position.
  • A firmer tone in the U.S. dollar index this morning is also negative for wheat futures. Investors are waiting on the Fed's announcement as to whether it plans to taper its bond-buying program.
  • But with U.S. wheat not as competitive on the global market, there is more near-term downside price risk for all wheat flavors, especially given stepped up competition with record Canadian supplies.
  • Nevertheless, Gulf SRW wheat basis is steady this morning to stand 95 cents over March futures.

 

Live cattle futures are called mixed as traders wait on cash trade signals.

  • Following yesterday's round of profit-taking, live cattle future are expected to be mixed as traders wait on cash trade to begin.
  • Cash trade could be delayed until after Friday's Cattle on Feed Report.
  • Choice beef values slipped $1.54 and Select values firmed 37 cents on slow movement of 113 loads.
  • While showlist numbers are down considerably in the Plains this week, a slowdown in beef trade reduces packers' urgency to bid up for cash cattle.
  • A choppy tone in the corn market could lead to mixed trade in feeder futures this morning.

 

Lean hog futures are called steady to weaker on followthrough pressure.

  • Lean hog futures are vulnerable to followthrough pressure as technical chart damage often builds on itself.
  • The pork cutout value slipped just 15 cents yesterday and it is still higher for the week after Monday's sharp gains. Pork movement has picked up, with 408.28 loads changing hands yesterday.
  • With market-ready hog supplies abundant, packer demand for hogs is limited. As a result, the cash hog market is called steady to weaker again this morning.
  • February lean hogs hold a $5 premium to the cash index, which opens additional near-term downside risk for the contract as the cash outlook is bearish.
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