Ahead of the Open (VIP) -- January 28, 2014

January 28, 2014 02:24 AM
 

Corn futures are called marginally to 1 cent lower in lackluster trade.

  • Corn futures didn't stray far from unchanged in overnight trade and ended near overnight lows.
  • A lack of fresh news should maintain a calm tone in the early going, although a firmer Gulf basis reflects an uptick in demand.
  • Gulf basis for immediate delivery is steady, but is up 1 cent for February delivery to stand 78 cents over March futures.
  • Traders are encouraged by the rebuilding of demand, but still note that carryover supplies should be plentiful at the end of the 2013-14 marketing year.
  • Also this morning, USDA announced that Spain purchased 110,000 MT of corn for 2013-14.

 

Soybean futures are called mixed, with nearbys weaker amid spread unwinding.

  • Nearby soybean futures ended the overnight session 1 to 2 cents lower and deferreds finished marginally to 3 cents higher amid bull spread unwinding.
  • Traders are reversing course this morning after bull spreading was seen yesterday to maintain a choppy price tone.
  • There are some concerns about demand this morning as Gulf basis for immediate delivery has slipped 5 cents to stand $1.05 over March futures.
  • Traders are watching for signs of Chinese sales cancellations. So far, no major cancellations have been reported.
  • But with Brazilian supplies expected to be more readily available in February, the threat of cancellations will remain over the market.

 

Wheat futures are called marginally to 4 cents higher on demand hopes.

  • SRW wheat ended the overnight session mostly 4 cents higher, with HRW up 2 to 3 cents. HRS was narrowly mixed.
  • Traders are waiting for results of an Egyptian wheat tender. The inclusion of U.S. wheat in this purchase would be another reminder that prices have fallen far enough to return U.S. wheat to "value" status.
  • Futures are also seeing slight support from frigid temps and a lack of significant snowcover over winter wheat areas of the Midwest and Plains, as it raises the risk of winterkill.
  • But traders won't get their first winter wheat condition ratings from USDA until April.

 

Live cattle futures are called mixed as traders wait on direction from the cash market.

  • Live cattle futures recovered from a weaker start yesterday, which gives bulls the slight upper hand coming into today's start.
  • But nervousness over the cash market will limit buying, as traders suspect a cash high has been posted, or soon will be.
  • This week's showlist is up marginally in Kansas and Texas, but up significantly in Nebraska, which lessens feedlots' bargaining power.
  • But a firmer tone in the boxed beef market yesterday signals the record run may not be over. Choice cuts firmed 78 cents and Select firmed 81 cents yesterday, but movement was quite light at 79 loads.
  • Feeder futures are expected to be mixed as well, with January futures trading in line with the cash index ahead of this week's expiration. March futures are trading at around a $2.50 discount to the cash index.

 

Lean hog futures are called mixed with an upside bias due to higher pork cutout values.

  • Lean hog futures are expected to see a mixed start, but bulls hold the advantage after most contracts posted a high-range close yesterday.
  • Pork cutout values firmed $1.50 yesterday to improve packer profit margins, but only 274.59 loads changed hands, suggesting prices are facing some retailer resistance.
  • The combination of frigid temps across the Corn Belt and strong packer margins is expected to result in steady to firmer cash hog bids today.
  • In fact, many packers are short bought and will ramp up kill schedules later this week, which should keep the cash market supported.
  • February lean hog futures were the exception yesterday and posted a low-range close as the contract works to trim the premium it holds to the cash index.
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