Ahead of the Open (VIP) -- January 23, 2014

January 23, 2014 02:19 AM
 

Corn futures are called 2 to 3 cents higher amid short-covering.

  • Corn futures ended the overnight session 1 to 2 cents higher on help from sharp weakness in the U.S. dollar index.
  • Otherwise, there's little fresh news for the market to digest as USDA's weekly export sales data is delayed until tomorrow due to Monday's federal holiday.
  • Traders have factored in improved weather across Argentina but note rains are needed in southern Brazil.
  • Therefore, traders are focused on evening positions, with March corn testing the $4.30 level.
  • Gulf corn basis is steady this morning to stand 72 cents over March futures.

 

Soybean futures are called 3 to 6 cents higher on short-covering.

  • Soybean futures strengthened throughout the overnight session and ended 4 to 6 cents higher on sharp weakness on the U.S. dollar index.
  • China's manufacturing sector contracted for the first time in six months, which signals the sector is slowing.
  • Traders are keeping an eye on the South American weather situation and note more rains coming by the weekend for Argentina and dry areas of southern Brazil.
  • Soybean futures have stabilized following Tuesday's sharp losses.
  • Gulf soybean basis is steady this morning. January delivery stands $1.10 over March futures. This suggests there is no fresh export news to report -- but also no large sales cancellations.

 

All wheat flavors are called 9 to 10 cents higher on sharp weakness in the dollar.

  • SRW wheat ended the overnight session mostly 9 to 10 cents higher, with HRW up 9 to 12 cents and HRS up 9 to 11 cents.
  • Futures are seeing a boost from sharp weakness on the dollar index, which is lifting gold and crude oil this morning.
  • Otherwise, there's little fresh news for the wheat market to digest, with focus on funds lightening their short exposure to the market.
  • March SRW wheat futures still have a lot of work ahead to signal a near-term low has been posted, but the contract has returned above $5.70.
  • Gulf SRW and HRW wheat basis is steady this morning to reflect a "calm" market.

 

Live cattle futures are called higher on record cash cattle prices.

  • Live cattle futures are expected to see followthrough from yesterday's sharp gains due to reports of cash cattle trade beginning at $147 in the Southern Plains and $150 in Nebraska.
  • February live cattle are severely oversold according to the Relative Strength Index, but still hold around a $3 discount to the bottom end of this week's cash trade.
  • Yesterday's Cold Storage Report showed beef stocks of 438.123 million lbs., which came in below expectations and were down 6% from year-ago levels, reminding the market of the tightening supply situation.
  • Traders will also be focused on evening positions ahead of tomorrow's Cattle on Feed Report, which is expected to show On Feed at 94.0%, Placements at 98.1% and Marketings at 102.2% of year-ago levels.
  • Nearby feeder futures are trading in line with the cash index, which could limit price action today, although feeders are likely to follow live cattle.

 

Lean hog futures are called to open steady to weaker on bearish cold storage data.

  • Lean hog futures are expected to see a weaker start after USDA revealed more pork stocks in cold storage at the end of December than expected.
  • Frozen pork stocks at 557.130 million lbs. came in 1% higher than year-ago and were up 2% from year-ago levels.
  • Indications that demand isn't as strong as expected should weigh on the market today, although yesterday's pork cutout market showed packers moved 458.74 loads of pork on slightly lower prices.
  • Extreme cold across the Midwest is slowing hog movement and packers have scaled back Saturday kill requirements, which has lowered demand for hogs.
  • The cash hog market is expected to be mostly steady today with a weaker undertone due to reduced demand.
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