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

December 26, 2013 02:16 AM
 

NOTE: There was no overnight trade coming out of Christmas. Grain markets reopen at 8:30 a.m. CT, while livestock trade resumes at 9:05 a.m. CT.

Corn futures are expected to open steady to a penny lower.

  • Light and choppy trade is expected this morning as some traders return from a brief, one-day Christmas break. But other traders are opting to take an extended break, which suggests trading volume will be relatively light.
  • New China rejected the first 2,000 MT shipment of U.S. dried distillers grains (DDGs) is price-negative, though this has been widely expected for some time. More rejections are expected as Chinese quarantine authorities increase inspections of U.S. DDG shipments.
  • With funds holding a sizable short position in corn and only four trading days left this year, some short-covering is possible. But funds have only mildly shown interest in covering short positions thus far.
  • Gulf corn basis is steady for all delivery periods this morning.

 

Soybean futures are seen opening 1 to 3 cents lower.

  • Traders' primary fundamental focus will be Argentine weather as trade resumes this morning. The weather picture has some bullish and some bearish aspects, making it difficult to decide which way traders will lean coming out of Christmas.
  • Some rains were seen through La Pampa and southwest Buenos Aires, Argentina, over Christmas, but temps remained very high. There are more rain chances today through Saturday with the precip likely to favor parts of Cordoba and Buenos Aires. Temps are forecast to remain very hot. Forecast models indicate a little wetter and a little cooler over key grain areas in the 6-10 day period.
  • While the rains will help, the hot temps are concerning. Therefore, we expect soybeans to favor the upside.
  • Gulf soybean basis is steady for all delivery periods this morning.

 

Wheat futures are expected to narrowly mixed to lower this morning.

  • Wheat traders will keep a close watch on the corn market for price direction this morning. If corn faces pressure, it will be hard for wheat to find buyers.
  • With wheat futures beaten down recently and funds short the market, some year-end short-covering is possible, though a lack of supportive news limits the upside to mild corrective buying.
  • The wheat market needs bullish demand news to signal prices have dropped far enough to attract export business. But U.S. wheat continues to face stiff competition on the global market.
  • Temps are expected to be normal to slightly above normal through the country's midsection the next couple days. But another wave of arctic air is forecast to push down from Canada early next week. Traders' concerns with the winter wheat crop are limited, however, as areas that will be the coldest are protected by snowcover.

 

Live and feeder cattle futures are called to open mixed this morning.

  • Live cattle futures are expected to be light and choppy coming out of Christmas as traders wait for cash cattle trade to develop in the Plains.
  • With bids and asking prices not yet established, it's unlikely cash cattle trade will get started today. In fact, some expect very little cash cattle trade this week, especially if packers don't offer at least steady money, as feedlots may be content to carry the bulk of this week's supplies into next week.
  • Boxed beef prices were firmer Tuesday, with Choice cuts rising 17 cents and Select $1.46 higher, while movement was a decent 158 loads. But the boxed beef market likely needs to show strength today to get packers to raise cash cattle bids from last week's $130 trade in the Plains.
  • Feeder cattle futures are expected to get little direction from either live cattle or the corn market, which points to light and choppy trade.

 

Lean hog futures are expected to open with a mixed tone.

  • Lean hog futures are expected to be choppy this morning in thin trade as some traders return from Christmas.
  • Cash hog bids are expected to be mostly steady across the Midwest today. While market-ready supplies are plentiful, some plants still need hogs for late-week slaughter runs and for early next week.
  • Temps are expected to warm somewhat and roads should be relatively decent for transporting hogs the next two days. With another wave of very cold temps and more snow forecast for early next week, producers may use the improved weather to get caught up on marketings today and Friday.
  • The pork cutout value firmed 40 cents Tuesday and packers moved a strong 506.54 loads of product on the day. That suggests the product market may be putting in a low.
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