Ahead of the Open (VIP) -- January 31, 2014

January 31, 2014 02:16 AM
 

Corn futures are called 1 to 2 cents lower on light profit-taking.

  • Corn futures ended the overnight session mostly 1 to 2 cents lower on light profit-taking following yesterday's gains.
  • Funds have slightly lightened their short exposure to the market, and with futures at the top of the consolidation range, traders are reevaluating positions.
  • Fundamentals suggest corn is a value buy based on improved demand seen this week, but so far traders have been reluctant to move futures above resistance levels as they fear higher prices will slow demand rebuilding.
  • Also this morning, USDA announced Spain purchased another 110,000 MT of U.S. corn for a total of 220,000 MT announced this week for 2013-14.
  • Gulf corn basis is steady to 3 cents higher for nearby delivery, with immediate delivery standing 80 cents over March futures. This suggests more demand news lies ahead.

 

Soybean futures are called narrowly mixed in lackluster trade.

  • Soybean futures ended the overnight session narrowly mixed, with nearbys favoring a firmer tone amid light bull spreading.
  • Traders' focus will be on end-of-the-month position squaring, as well as outside markets. The U.S. dollar index is firmer again this morning, which is limiting buying enthusiasm in the commodity markets.
  • News that ships are lined up and being loaded in Brazil raises the risk of U.S. soybean sales cancellations, although no major cancellations have been reported yet.
  • Traders are also concerned about news that Cargill announced it is idling a North Carolina soy crushing plant later this spring, as it raises questions about domestic demand, as well as possible imports from South America.
  • Gulf soybean basis is steady this morning.

 

SRW and HRW wheat are called 1 to 2 cents higher, with HRW expected to be mixed.

  • SRW and HRW wheat futures ended the overnight session marginally to 2 cents firmer, while HRS favored a slightly weaker tone in mixed trade.
  • Strength in the U.S. dollar index is limiting buying to short-covering this morning as it creates a "risk-off" atmosphere in the commodity world.
  • But with wheat futures oversold, downside risk is being limited this morning and creating some short-covering in SRW and HRW futures as traders even positions at month's end.
  • Traders still have yesterday's stronger-than-expected weekly export sales data on their minds.
  • Gulf SRW and HRW wheat basis is steady this morning to signal supplies and demand are in balance.

 

Live cattle futures are called to open mixed as traders wait on active cash trade and the Cattle Inventory Report.

  • Following yesterday's price recovery, live cattle futures are expected to see a choppy start as traders wait on active cash cattle trade to begin.
  • So far, just very light cash trade has been reported at lower prices than last week, which raises expectations for similar trade today. But feedlots say cash trade so far this week has been too light to be a true market test and they are asking at least steady with last week's record prices.
  • Meanwhile, traders are wrapping up position squaring ahead of this afternoon's Cattle Inventory Report that will reflect tight supplies, but also active herd rebuilding. Click here for full pre-report expectations.
  • Choice beef values slipped another $1.06 yesterday and Select softened by 64 cents on improved (but still light) movement of 117 loads.
  • Light weakness in the corn market is supportive for feeder futures this morning.

 

Lean hog futures are called firmer on strength in the pork market.

  • Lean hog futures are expected to be firmer this morning as traders react to this week's improvement in the pork market.
  • Pork values firmed $1.18 yesterday to boost packer demand for cash hogs. But for the day, movement was light at 253.12 loads, which raises concerns about pork demand.
  • Still, with packers' margins well in the black and some packers short bought for the week, the cash market is expected to be steady to $1 higher as they work to secure supplies for tomorrow's kill.
  • Traders are comfortable with the premium structure built into nearby futures compared to the cash market as they look for more seasonal strength. But this premium limited buying in nearby futures yesterday.
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