Ahead of the Open (VIP) -- February 27, 2014

February 27, 2014 02:16 AM
 

Corn futures are called 2 to 3 cents lower this morning amid spreading with soybeans.

  • Corn futures ended the overnight session mostly 2 to 3 cents lower on slight strength in the U.S. dollar index and spreading with beans.
  • However, traders could view early weakness as a buying opportunity due to a stronger-than-expected showing from the Weekly Export Sales Report.
  • The report showed corn sales of 840,800 MT for 2013-14, which came in above expectations. Sales of 1,500 MT were also noted for 2014-15. Exports of 853,100 MT were up from the previous week.
  • The solid showing in the export sales report signals current prices are stimulating demand, which will help to keep March corn supported around the $4.50 level.
  • Adding to the strong demand picture, USDA announced a 284,480 MT corn sale to Mexico for 2013-14.
  • Gulf basis is 1 cent firmer for immediate delivery this morning to stand 94 cents over March futures.

 

Soybean futures are called mixed amid bull spreading.

  • Nearby soybean futures ended the overnight session 3 to 10 cents higher, with deferreds steady to firmer tone in mixed trade.
  • Old-crop futures continue to find support from ongoing demand for U.S. soybeans and shipping delays in South America, as well as concerns the top end of yield potential has been shaved off the Brazilian crop due to late-season dryness in southern Brazil and rains causing quality issues in Mato Grosso.
  • This morning's weekly sales report showed old-crop soybean sales of 327,700 MT, with no large cancellations. Sales of 315,200 MT were reported for 2014-15. Combined, the tally came within expectations.
  • Impressively, exports of nearly 1.8 MMT were reported, with China taking delivery of more than 1 MMT of soybeans.
  • Also this morning, USDA said 112,000 MT of optional-origin soybeans were sold to China for 2013-14.
  • Gulf soybean basis is down 7 cents for March delivery which reflects a softening of demand.

 

Wheat futures are called 3 to 6 cents lower on export concerns.

  • SRW and HRW wheat futures were mostly 6 to 7 cents lower in overnight trade, with HRS down mostly 1 to 5 cents.
  • Wheat futures are being pressured by news Argentina has approved another 500,000 MT of wheat for export, taking the total so far for 2013-14 to 1 MMT.
  • But as we reported yesterday, the attaché in Brazil says millers in the country continue to buy U.S. wheat since Argentina is a "problematic supplier."
  • This morning's weekly sales report showed wheat sales of 365,100 MT for 2013-14 and 199,800 MT for 2014-15, which topped expectations. This should help limit pressure this morning, as it alleviates concerns about U.S. wheat being noncompetitive on the global market.
  • Meanwhile, the National Drought Monitor reflects the spread of drought in the Southern Plains, which raises concern about the condition of the crop.

 

Live cattle futures are called to open slightly to sharply higher on sharply higher cash cattle trade.

  • Live cattle futures are called higher after trading sharply to limit higher in electronic trade.
  • Futures are also expected to see followthrough from yesterday's sharp gains that resulted in the front-month contract moving to an all-time high of $148.65.
  • Light cash cattle trade was seen in Nebraska at $152 and around $150 in Texas and Kansas late yesterday afternoon, which is up $4 to $6 from last week.
  • Many feedlots passed on the higher bids as it appears packers are in need of supplies.
  • Live cattle futures ended yesterday's session at a discount to the cash market, which opens sharp upside potential for nearby futures.
  • Meanwhile, a weaker tone in the corn market is supportive for feeder futures this morning, although March futures are trading at around a $2 premium to the cash index.

 

Lean hog futures are called slightly to moderately higher on spillover from live cattle and support from the cash market.

  • Lean hog futures are expected to enjoy spillover from live cattle as well as from the cash hog market.
  • Cash bids are expected to be steady to $1 higher again this morning as packers are forced to pay up for supplies due to frigid temps across the Corn Belt.
  • Packers have seen profit margins tighten dramatically this week, although they remain in the black.
  • Pork cutout values improved 24 cents yesterday and movement was a strong 451.57 loads. Improved movement this week is also behind packers' stronger demand for cash supplies.
  • Meanwhile, lean hog futures are overbought and vulnerable to a correction. Additionally, Nearby futures are trading at a steep premium to the cash index.
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