Ahead of the Open (VIP) -- January 24, 2014

January 24, 2014 02:21 AM
 

Corn futures are called 2 to 3 cents lower on spillover from soybeans.

  • Corn futures ended the overnight session mostly 2 to 3 cents lower to erase yesterday's gains. Futures are still working on slight weekly gains, however.
  • Pressure should be limited by this morning's weekly export sales data, as it showed corn sales of 693,000 MT for 2013-14, which came in above expectations. Egypt was the lead buyer, which signals corn is a value buy.
  • Meanwhile, China says it plans to expand its grain production by 50 MMT by 2020 by increasing acreage and seed technology in an effort to become self sufficient.
  • A flurry of daily export sales should limit pressure. USDA reported a 150,000 MT corn sale to Spain, a 120,000 MT corn sale to Egypt and a 100,000 MT corn sale to Japan. All of these are for 2013-14 delivery.
  • Traders are also keeping an eye on the Chinese trade situation. Grain industry groups have asked Syngenta to suspend commercial use of its Viptera corn seed in the U.S. until China grants regulatory approval of the variety.

 

Soybean futures are called 5 to 10 cents lower on concerns about increased Argentine old-crop bean sales.

  • Soybean futures were pressured overnight by the sharp devaluation of the Argentine peso. This raises expectations farmers there will sell old-crop beans they have been holding as a hedge against inflation.
  • Traders also note improved weather for developing soybeans in Argentina, although more rains are needed to improve crops. Showers are also in the forecast for dry areas of southern Brazil the next several days.
  • But pressure should be limited by a strong showing in the weekly sales report. Sales of 703,400 MT for 2013-14 and 969,800 MT for 2014-15 came in well above expectations.
  • Interestingly, China only canceled 12,700 MT of old-crop soybeans, with an unknown buyer canceling 302,100 MT. Exports of nearly 1.583 MMT were strong, with China the lead destination.
  • Also this morning, USDA announced a soybean sale of 126,000 MT to China for 2014-15.

 

All wheat flavors are called 2 to 4 cents lower on spillover from soybeans and position squaring.

  • After yesterday's gains, wheat futures saw spillover from soybean futures and the hesitancy of funds to continue covering short positions.
  • Meanwhile, weekly wheat sales of 421,400 MT for 2013-14 were within expectations, with Brazil the lead buyer. There were also net sales reductions of 8,000 MT for 2014-15, Exports of 420,700 MT were down 28% from the previous week.
  • The market needs to see improved demand in order to build a base of support.
  • Traders are also talking about the potential for winterkill in the U.S. winter wheat crop due to a lack of snowcover across the HRW and SRW areas.
  • But at this point, traders aren't overly concerned about winterkill, which is only encouraging short-covering.

 

Live cattle futures are expected to be mixed as traders prepare for the Cattle on Feed (COF) Report.

  • Live cattle futures are expected to see a choppy start ahead of the COF Report, but bears hold the advantage after yesterday's price weakness.
  • The COF Report is expected to show On Feed at 94.0%, Placements at 98.1% and Marketings at 102.2% of year-ago levels.
  • Meanwhile, Choice beef values posted only their second price decline of the year yesterday by slipping $1.50 to $238.55. Select values softened 51 cents. Movement improved slightly to 122 loads.
  • Pressure on cattle futures should be limited by the fact nearby futures continue to hold a sizable discount to this week's $147 to $150 cash cattle trade.
  • Pressure on feeder futures should be limited by weakness in the corn market, but price movement is likely to be narrow as nearbys are trading in line with the cash index.

 

Lean hog futures are called to open steady to firmer on strength in the product market.

  • Lean hog futures are expected to see a lift this morning from strength in the pork and cash markets.
  • Pork cutout values improved 91 cents yesterday on decent movement of 355.22 loads.
  • This week's blowing snow across the Corn Belt and Monday's federal holiday has some packers looking to ramp up their Saturday kill requirements.
  • As a result, some packers are expected to raise cash bids, which is supportive for futures.
  • But buying could be limited as February lean hogs hold around a $5 premium to the cash index.
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