Ahead of the Open (VIP) -- February 7, 2014

February 7, 2014 02:17 AM
 

Corn futures are called marginally to 2 cents lower in lackluster trade.

  • Corn futures ended the overnight session fractionally to a penny lower.
  • Futures saw limited trade overnight as traders are beginning to more actively even positions ahead of Monday's USDA Supply & Demand Report.
  • Traders are also reevaluating positions to determine if corn is still a value buy. Yesterday's impressive weekly export sales tally signals importers still believe this is the case.
  • A weaker tone in the U.S. dollar index is also supportive for commodity markets this morning.
  • Also this morning, USDA announced an unknown buyer purchased 141,200 MT of old-crop U.S. corn to signal prices are still attracting demand.
  • Gulf corn basis is 1 cent higher for May delivery and steady for other delivery months.

 

Soybean futures are called mixed amid bull spread unwinding.

  • Old-crop soybean futures ended the overnight session 1 to 3 cents lower, with new-crop marginally to 2 cents higher.
  • Following strong gains in nearby contracts, traders' focus is on bull spread unwinding.
  • A weaker tone in the U.S. dollar index this morning is supportive for commodity markets and could propel some followthrough buying in nearby futures this morning.
  • Traders recognize the window on U.S. exports has not yet closed, as China was again noted as the top buyer of old-crop soybeans in yesterday's weekly sales report.
  • Gulf soybean basis is steady to 1 cent higher to reflect tightening of supplies as as result of continued strong demand.

 

Wheat futures are called 1 to 2 cents higher on weakness in the U.S. dollar index.

  • All wheat flavors ended the overnight session mostly 2 to 3 cents higher on help from weakness in the U.S. dollar index and ideas yesterday's losses were overdone.
  • The dollar is weakening on disappointing monthly jobs data that showed the economy added just 113,000 non-farm payrolls in January.
  • Meanwhile, ongoing drought conditions and concerns about winterkill are supportive for the winter wheat markets.
  • Shipping delays in Canada are also supportive for HRS futures.
  • Gulf SRW wheat basis is 1 cent firmer for May delivery and steady for other delivery months.

 

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

  • Live cattle futures are expected to see another choppy day of price action as traders wait on direction from the cash market.
  • This week's showlist is smaller than last week, but beef prices have dropped sharply to take packers' profit margins back into the red.
  • Choice values slipped $3.13 yesterday and Select dropped $4.32. The good news is beef movement has improved this week, but it still isn't strong enough to signal a low has been posted.
  • General expectations are for $1 to $2 lower cash trade, although it could be delayed until this afternoon.
  • March feeder futures ended yesterday at around a $3 discount to the cash index, which should limit pressure on the nearby contracts this morning.

 

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

  • Lean hog futures are called mixed on a continuation of yesterday's choppy price action as traders reevaluate positions.
  • Packers have seen profit margins tighten this week, but they are still in the black, which keeps demand for hog supplies strong.
  • This week's kill has been interrupted by winter weather, but firmer bids today should help clean up this week's showlist.
  • February lean hog futures hold around a $3 premium to the cash index ahead of its expiration next week. As a result, buying in the nearby contracts will be limited.
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