Ahead of the Open (VIP) -- February 6, 2014

February 6, 2014 02:10 AM
 

Corn futures are called 2 to 5 cents higher on continued strong demand.

  • Corn futures ended the overnight session 1 to 3 cents higher, but an even stronger open is a possibility given continued strong demand.
  • This morning's weekly export sales data showed sales of more than 1.7 MMT for 2013-14, with Japan the lead buyer. This easily topped expectations and signals last week's higher prices didn't slow demand.
  • Exports of 747,300 MT were down 26% from the previous week, although an increase is expected in the near-term as the soybean shipping season slows.
  • Also this morning, USDA announced China canceled 220,000 MT of old-crop corn buys, which is not a surprise to the market.

 

Soybean futures are called 5 to 15 cents higher as China continues to buy old-crop beans.

  • Soybean futures ended the overnight session 5 to 10 cents higher to build on yesterday's gains. Technically-based buying is expected to build on overnight gains.
  • Traders remain concerned about the hot and dry conditions in southern Brazil during pod-filling, although strong early season yields continue to be reported in Mato Grosso.
  • Also supportive this morning is weekly export sales of 577,000 MT for 2013-14 and 219,500 MT for 2014-15.
  • While the sales tally came within traders' expectations, China remained the lead buyer of old-crop soybeans.
  • Additionally, exports topped 1.5 MMT and were mostly to China.
  • The window is remaining open on U.S. soybean exports longer than traders expected, as they believed China would be canceling large purchases by now.

 

Wheat futures are called 1 to 5 cents higher on spillover from neighboring pits.

  • SRW wheat ended the overnight session mostly 1 to 2 cents higher, with HRW up 3 to 4 cents. HRS ended 4 to 7 cents higher.
  • Wheat enjoyed spillover from neighboring pits, as well as news of an increase in Japanese purchases.
  • Canadian shipping delays have forced Japan to increase its purchases of U.S. wheat. Once the U.S. soybean shipping season slows, it could provide an opportunity for an increase in U.S. wheat business.
  • Weekly wheat sales of 638,800 MT for 2013-14 and 94,800 MT for 2014-15 were within expectations but reflect solid demand.

 

Live cattle futures are called mixed with a firmer tone as traders wait on cash trade signals.

  • Live cattle futures are expected to see a choppy start as traders wait on cash trade to begin.
  • Choice beef values slipped another $3.85 yesterday and have declined $15.17 over the last week. The good news is movement picked up to 179 loads yesterday, although that isn't strong enough to stabilize the beef market.
  • Packers have seen profit margins erode, which could limit demand for cash supplies. Packers have not yet begun actively bidding for cattle this week.
  • Feedlots are hoping for steady bids with last week due to a smaller showlist, but most are expecting $1 to $2 lower trade compared with last week's $144 to $145 trade.
  • A firmer tone in the corn market could weigh on feeders this morning.

 

Lean hog futures are expected to favor a firmer tone in mixed trade.

  • Lean hog futures are expected to favor a firmer tone this morning in mixed trade after futures posted high-range closes yesterday.
  • Futures are vulnerable to some profit-taking after yesterday's strong gains, however.
  • Pork cutout values slipped 41 cents yesterday, but movement was a strong 439.15 loads.
  • The cash hog market is called steady to higher as packers are working to secure needed supplies after weather disruptions earlier this week.
  • However, an increase in market-ready supplies this week means packers are having no difficulty securing supplies and bids could stabilize.
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