Ahead of the Open (VIP) -- February 3, 2014

February 3, 2014 02:18 AM
 

Corn futures are called 1 to 2 cents higher in lackluster trade.

  • Corn futures ended the overnight session 1 to 2 cents higher in quiet trade.
  • But the ability of the March contract to move above last week's high and pivot around the January high of $4.35 1/2 is a sign the market is building some upward momentum.
  • Therefore, how corn closes today could be very telling of the near-term direction of the market.
  • Traders recognize export demand has picked up recently, but they are also concerned that if prices rally too far too fast, demand will slow.
  • Reminding of strong demand, USDA says an unknown destination purchased 113,780 MT of corn for 2013-14.
  • Meanwhile, Gulf corn basis is 1 cent firmer for April delivery this morning, while other months are steady.

 

Soybean futures are expected to be mixed this morning amid spreading.

  • Soybean futures ended the overnight session narrowly mixed, with nearbys favoring a firmer tone.
  • There's little fresh news for the market to digest, although traders remain focused on the South American situation.
  • The Brazilian soybean-shipping season has begun, with a few ships leaving the ports late last week.
  • Traders remain concerned that as beans actively flow out of ports, China will cancel large U.S. sales that remain on the books.
  • USDA reports an unknown buyer purchased 40,000 MT of soyoil for 2013-14.
  • Gulf soybean basis is steady this morning, with immediate delivery standing 85 cents over March futures.

 

SRW wheat is called steady to 1 cent higher, with HRW and HRS 1 to 2 cents lower.

  • SRW wheat ended the overnight session marginally higher on light spillover from corn futures, while HRW and FRS saw light pressure and ended the overnight session marginally to 1 cent lower.
  • Wheat futures are due for a corrective bounce given the oversold condition of the market, but attitudes remain bearish.
  • The Russian government reports from July 1 through Jan. 26 it exported 17.327 MMT of grain, up 28.5% from the same period in 2012-13. Wheat exports account for 13.1 MMT of the total.
  • Some snow is in the forecast for winter wheat areas this week, which would help protect the crop from cold temps and provide some needed moisture.
  • Gulf SRW wheat basis is steady this morning, but HRW basis is up 5 cents for immediate delivery to signal fresh demand has surfaced.

 

Live cattle futures are called mixed in reaction to the Cattle Inventory Report.

  • Live cattle futures are expected to see a choppy start in reaction to the Cattle Inventory Report that confirmed the U.S. Cattle herd was the smallest in 63 years.
  • But traders are disappointed by the beef heifer replacement figure that came in below expectations at 102% of year-ago. They expected more heifers were being placed on pasture and out of the slaughter mix this year.
  • But the report provides a reminder to the market that beef supplies will remain tight at least well into 2015.
  • Meanwhile, Choice beef values plummeted $7.26 on Friday and Select declined $4.94. Select values start the week at a $1.36 premium to Choice values, which reflects tight supplies.
  • If beef values continue to soften this week it would trim packers' profit margins and therefore, demand for cash supplies.
  • But more winter weather moving across the Plains and Midwest this week keeps animals in feedlots under stress and raises questions about available supplies this week.

 

Lean hog futures are called mixed, with buying limited by weakness in the pork market.

  • Lean hog futures are expected to see a choppy tone, with pressure coming from weakness in the pork market but some support coming from a firmer tone in the cash market.
  • Some packers are short bought coming into this week. And with another winter storm headed to the Midwest and East Coast this week, demand for hogs is expected to be strong today.
  • Meanwhile, pork cutout values slipped $1.83 on Friday and movement was light at 256.11 loads.
  • While February lean hogs were slightly lower on Friday, the rest of the market posted strong gains and is vulnerable to some profit-taking.
  • But concerns that porcine epidemic diarrhea virus (PEDAL) is still not under control raises concerns about supplies tightening even further into the summer months.
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