Ahead of the Open (VIP) -- July 10, 2013

July 10, 2013 03:19 AM
 

Corn futures are called to open mixed amid bull spreading.

  • Corn futures ended the overnight session mixed, with the front-month contract marginally higher and new-crop contacts around a penny lower.
  • Corn was choppy overnight, with some light profit-taking seen in late trade. Key this morning will be if funds return as buyers, which has been the case so far this week.
  • Meanwhile, forecasts have warmed up for the next week to 10 days, with a more summer-like weather pattern setting in. Rain chances have also diminished. This is raising concerns about stress on shallow-rooted crops.
  • Traders will also be focused on evening positions ahead of tomorrow's USDA reports, which are expected to show a drop in old- and new-crop carryover from last month.
  • Also this morning, USDA announced China has purchased 120,000 MT of new-crop U.S. corn, further signaling prices are at "value" levels.

 

Soybean futures are called to open 1 to 3 cents higher on weather concerns.

  • Soybean futures ended the overnight session mostly 1 to 3 cents higher, which was mid-range for the session.
  • Concerns about the warm forecast that includes dryness in southern regions of the Corn Belt for the next week to 10 days is raising concerns about the crop, although after two strong days of price gains, traders are reevaluating positions.
  • Key at the start of the daytime session will be if funds return as active buyers, which has been the case so far this week.
  • According to official Chinese customs data, the country imported a record 6.93 MMT of soybeans last month -- up 36% from the previous month and 23% higher than a year-ago.
  • China is expected to import more than 7 MMT of soybeans this month and so far this calendar year, imports of 27.49 MMT are down 5.4% from last year.
  • Meanwhile, China reported disappointing trade data for June, with a rising trade surplus due to softening exports.

 

Wheat futures are expected to be mixed this morning as traders continue to keep a close eye on neighboring markets.

  • Wheat futures were narrowly mixed to end the overnight session amid spillover from neighboring corn and soybean markets.
  • Key for the wheat market will be if funds return as strong buyers of corn and soybeans this morning due to weather concerns.
  • While HRW wheat harvest is in its final days across Kansas and export demand has picked up, wheat futures still haven't confirmed that near-term lows are posted.
  • Traders are also beginning to focus on evening positions ahead of tomorrow's USDA reports. Traders look for USDA to tighten 2013-14 carryover from last month.
  • Traders also look for USDA to trim its all wheat crop estimate from 2.08 billion bu. last month to 2.057 billion.

 

Live cattle futures are called steady to firmer on followthrough from yesterday's gains.

  • Live cattle futures are expected to benefit from followthrough after many contracts posted bullish reversals yesterday. Stronger closes today would build upward momentum.
  • But traders are still waiting on confirmation the boxed beef market has posted a near-term low. While Select values improved by 72 cents yesterday, Choice values slipped 53 cents and movement was lackluster at 169 loads.
  • This week's cattle showlist is smaller across the Plains, which gives feedlots more bargaining power in cash negotiations.
  • But a wide spread between bid and asking prices signals cash trade could be delayed until tomorrow or Friday.
  • August live cattle are trading at more than a $3 premium to last week's cash market, which reflects traders' positive bias toward the market.

 

Lean hog futures are called to open mixed on spreading.

  • Lean hog futures are expected to continue the choppy trend with another mixed day of price action today.
  • Bulls will have a difficult time gaining traction today based on softening cash fundamentals.
  • The cash market is called steady to $1 lower as packers focus on improving profit margins. Demand is varied this morning, as some locations are still in need of additional loads, but packers aren't willing to pay up for supplies, which is raising concern about demand.
  • Pork cutout values slipped $1.08 yesterday on decent movement of 354.8 total loads.
  • Pressure on futures should be limited by the discount nearby contracts hold to the cash index. August lean hogs, which will soon be the lead-month contract, are trading at around an $8 discount to the index.
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