Ahead of the Open (VIP) -- January 2, 2014

January 2, 2014 02:13 AM
 

Corn futures are called 1 to 3 cents lower on followthrough from Tuesday's losses.

  • Grain markets were closed overnight and will open at 8:30 a.m. CT. Corn futures are expected to see followthrough from Tuesday's losses.
  • Sharp strength in the U.S. dollar index also indicates the possibility of widespread commodity selling this morning.
  • Traders are also keeping an eye on the weather in South America. Drought areas of Argentina have received some rains and temperatures are moderating.
  • Funds did little in the way of short-covering as they closed their books on 2013, signaling they are very comfortable with a large net short position to start the new year.

 

Soybean futures are called 3 to 5 cents lower on strength in the dollar index.

  • Soybean futures are expected to see followthrough from Tuesday's losses, as well as from strength in the U.S. dollar index.
  • The dollar index has started the year trading sharply higher, which is expected to provide widespread selling in the commodity world this morning.
  • Soybean futures did some short-term technical chart damage on Tuesday, which is also a negative sign to start the new year.
  • March soybean futures posted a low for December on Tuesday to signal a near-term high is in place.
  • While there are scattered showers in the forecast for Argentina, mostly dry weather is expected across Brazil the next five days. However, traders still expect a record crop from South America this year.

 

All wheat flavors are called 2 to 4 cents lower on strength in the dollar index.

  • All wheat flavors are expected to see a weaker start on spillover from neighboring pits and on strength in the dollar index.
  • Without other fresh news for the market to digest, there is risk of stepped up selling this morning, especially with strength in the dollar raising concern about the competitiveness of U.S. exports on the global market.
  • Traders will have to wait until tomorrow for weekly export sales data, although lackluster sales are expected.
  • Key this morning will be if March SRW wheat can hold above the $6.00 level after bouncing off the level on Tuesday, which signals it as an important support level.

 

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

  • Live cattle futures are expected to see a choppy start, with traders hesitant to add to long positions before the start of cash cattle trade.
  • Pressure on live cattle will be limited by expectations for $1 higher cash trade, although that is factored into prices.
  • Choice beef values rose back above the $200 level on Tuesday, with Select trading just $4.24 below Choice values.
  • Expected weakness in the corn market will limit selling to profit-taking in feeder futures this morning.

 

Lean hog futures are called mixed amid spreading.

  • Lean hog futures are expected to see a choppy start as traders return to reestablish positions.
  • But pressure on futures should be limited by Tuesday's solid performance in the pork market.
  • Pork cutout values firmed 37 cents on Tuesday amid very strong movement of 632.24 loads. While ham values were sharply lower, belly values were sharply higher.
  • Frigid temps across the Corn Belt are expected to slow hog movement today, which could help to firm some bids as packers work to secure a large Saturday kill after the holiday interruptions.
  • February lean hog futures are trading at a $6 premium to the cash index, which raises the risk of sharp near-term pressure.
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