Ahead of the Open (VIP) -- January 30, 2014

January 30, 2014 02:18 AM
 

Corn futures are called 2 to 3 cents higher on demand improvements.

  • Corn futures ended the overnight session 2 to 3 cents higher as funds are beginning to more actively cover short positions ahead of month end.
  • Also providing a lift to the market this morning is the strong weekly export sales data that signals U.S. corn is a value.
  • Weekly export sales of 1,837,900 MT for 2013-14 and 105,700 MT for 2014-15 came in well above expectations and exports topped 1 MMT.
  • The top buyers were Japan (which included switches from unknown), unknown destinations and Spain.
  • Additionally, USDA announced an unknown buyer purchased 127,000 MT of corn for 2013-14.
  • But it could be difficult for corn to gain very much upward momentum due to strength in the dollar.
  • Gulf corn basis is steady to 1 cent weaker this morning after firming yesterday. This suggests demand has relaxed.

 

Soybean futures are called steady to 2 cents lower as attitudes are "cautious."

  • Soybean futures ended the overnight session steady to a penny lower, which was well off session lows. Traders have a cautious attitude as they believe exports will slow.
  • Weakness for much of the overnight session came on followthrough from yesterday's losses on concerns that demand from our top buyer -- China -- will soon diminish as Brazilian supplies become available.
  • Additionally, China will begin its Lunar New Year celebrations tomorrow, which typically brings a slowdown in demand news.
  • This morning's weekly sales report showed a slowdown in sales business, with purchases of 494,800 MT for 2013-14 and 371,000 MT for 2014-15. This came within expectations and included decreases of 610,300 MT for unknown destinations.
  • But weekly export shipments of 2,114,600 MT were impressive, with China the lead destination.
  • Gulf soybean basis is steady this morning to stand $1.05 above March futures for immediate delivery. This does not suggest there were large sales cancellations yesterday as rumored by the market.

 

SRW and HRW wheat are called 2 to 4 cents higher and HRS is called 1 to 2 cents higher.

  • SRW and HRW wheat futures led gains overnight, ending the session mostly 2 to 4 cents higher, while lighter buying was seen in the HRS market on concerns about shipments from Canada picking up.
  • Traders are encouraged by this morning's weekly export sales data that showed sales of 794,900 MT for 2013-14 and 2,000 MT for 2014-15. This was well above expectations and signals U.S. wheat is a value buy.
  • News that Egypt, the world's largest wheat importer, has tightened its moisture specifications for grain could be good news for the U.S. Traders believe it could reduce demand for French wheat.
  • But sharp strength in the dollar is raising concerns about the competitiveness of U.S. wheat on the global market. The dollar is strengthening on further tapering of economic stimulus announced yesterday by the FOMC.

 

Live cattle futures are called to open lower due to plunging beef values.

  • Live cattle futures are expected to be pressured by weakness in the beef market, which is spurring talk of a major high being posted.
  • Choice beef values plunged $3.99 yesterday and Select dropped $3.24 to trim packer profit margins.
  • The good news is beef movement is picking up on a slide in price, as 133 loads changed hands yesterday.
  • Only very light cash trade has been seen this week at $1 lower prices. Packers began bidding $146 for supplies in the Southern Plains yesterday.
  • Meanwhile, traders are also beginning to more actively even positions ahead of tomorrow's Cattle Inventory Report. The report is expected to show all cattle and calves at 98.6% of year-ago, with beef replacement heifers at 103.1% of year-ago to suggest herd rebuilding has actively begun.
  • A slightly firmer tone in the corn market should weigh on feeder futures this morning.

 

Lean hog futures are called mixed on a combination of followthrough buying and profit-taking.

  • Lean hog futures are vulnerable to some profit-taking following yesterday's strong gains in nearby contracts, but with attitudes turning positive, pressure will be limited to profit-taking.
  • Traders have a positive attitude toward the cash market the remainder of the week as packers are working to secure hogs after winter weather slowed movement to start the week.
  • Despite sharp weakness on beef prices this week, pork values have held up strong. Yesterday, cutout improved a penny on solid movement of 405.78 loads.
  • Buying in February futures, however, could be limited as the contract holds nearly a $5 premium to the cash index.
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