Ahead of the Open (VIP) -- January 13, 2014

January 13, 2014 02:18 AM
 

Corn futures are called 1 to 2 cents higher on light followthrough buying.

  • Corn futures opened the overnight session under light profit-taking pressure but ended the session marginally higher.
  • Traders still have Friday's friendly USDA reports on their minds, in which USDA lowered the size of the 2013 corn crop, revealed record first quarter use and lowered carryover.
  • While the report data was friendly, carryover is still up sharply from year-ago, which is limiting followthrough buying this morning.
  • A high-range close today following Friday's key bullish reversal would be a sign a near-term low has been posted.
  • South Korea bought 137,000 MT of U.S. corn originally destined for China at a discounted price.

 

Soybean futures are called 3 to 5 cents lower as focus returns to the South American crop.

  • Soybean futures ended the overnight session mostly 2 to 5 cents lower as focus has returned to prospects for a record-large South American crop.
  • Forecasts for hot and dry conditions in Argentina this week are a concern for crop prospects, but mostly favorable weather is expected to continue across Brazil.
  • Traders also have USDA's Friday reports on their minds, in which USDA raised the size of the soybean crop and left 2013-14 carryover unchanged at 150 million bu. due to stronger-than-expected first quarter use.
  • Gulf soybean basis is 1 cent firmer for immediate delivery to stand $1.24 over March futures, reflecting ongoing strong demand.

 

Wheat is called 2 to 3 cents higher on spillover from corn.

  • SRW and HRS wheat ended the overnight session mostly 2 to 4 cents higher. Nearby HRW contracts were up 1 to 2 cents and deferreds finished mixed.
  • Following Friday's sharp losses, wheat is due for a corrective bounce to correct the oversold condition of the market.
  • While USDA pegged 2014 winter wheat acreage below expectations, it raised U.S. and global wheat carryover from last month, which gave the reports a negative read.
  • Argentina's ag ministry has raised its 2013-14 wheat crop estimate by 200,000 MT to 9.2 MMT. Exporters and importers are waiting on the Argentine government to announce wheat export permits for 2013-14.
  • On a positive note, Egypt purchased 55,000 MT of U.S. SRW wheat. The country is a value buyer, which signals U.S. wheat is once again competitive on the global market.

 

Live cattle futures are called higher in reaction to record cash cattle trade.

  • Live cattle futures are expected to see a boost from news of record cash cattle trade of $139 to $140 in the Plains on Friday.
  • February live cattle ended last week at around a $3 discount to the top of last week's cash trade, which suggests traders believe a near-term high is in the works.
  • But the boxed beef market also rallied to record levels on Friday, with Choice up $2.93 to $214.98 and Select up $2.53 to $211.58.
  • Traders will be watching the beef market closely to start the week for a gauge of this week's cash prospects.
  • Light strength in the corn market this morning will limit buying in feeder futures.

 

Lean hog futures are called mixed on position squaring.

  • Lean hog futures are expected to see a choppy start as traders even positions and wait on clear direction from the cash market.
  • The cash hog market is expected to see a mostly steady start as some locations are in need of supplies.
  • Higher slaughter needs after last week's unfavorable weather could lead to some firmer bids. Plus, packers are again enjoying strong profit margins.
  • Pork cutout values softened by 11 cents on Friday amid decent movement of 366.96 loads.
  • Nearby lean hog futures are trading at a sizable premium to the cash index, which raises the risk of stepped up pressure in the near-term. But it also suggests that traders are optimistic the pork market is nearing a seasonal low.
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