Ahead of the Open (VIP) -- July 12, 2013

July 12, 2013 03:16 AM

Corn futures are called to open 1 to 5 cents lower on profit-taking.

  • Corn futures ended the overnight session 1 to 7 cents lower amid bull spread unwinding and saw light profit-taking pressure following yesterday's gains.
  • Traders still have yesterday's USDA S&D Report on their minds, which reflected a tightening of old-crop carryover and an increase in new-crop carryover from last month.
  • But focus has shifted to the weather. Hot and dry conditions are expected to build across the Corn Belt over the weekend.
  • Extended weather models are not in agreement as to the lasting of the high pressure ridge over the central Corn Belt, which could result in volatile price action to end the week.
  • Gulf corn basis is 6 cents lower for immediate delivery to stand 39 cents over July futures, reflecting a softening in old-crop demand. But basis for August delivery has firmed by 5 cents.
  • Also this morning, USDA confirmed China was in the market recently for large purchases of U.S. corn by announcing purchases of 960,000 MT for 2013-14.


Soybean futures are called to open steady to 4 cents lower in new-crop contracts, with stiffer losses for nearbys amid bull spread unwinding.

  • July soybeans ended the overnight session 8 3/4 cents lower, with the rest of the market steady to 4 cents lower amid bull spread unwinding.
  • Following yesterday's high-range closes, traders have returned to take some profits out of the market.
  • Traders still have yesterday's USDA's reports on their minds, in which USDA left old-crop bean carryover unchanged and raised new-crop carryover from last month.
  • But traders' focus has turned to the weather and the movement of the high pressure ridge further east to block out moisture and raise temps across the Corn Belt this weekend.
  • Gulf soybean basis is 7 cents weaker for immediate delivery to stand 41 cents over July futures to reflect a softening in demand.


Wheat futures are called 2 to 4 cents higher on improved fundamentals.

  • Wheat futures ended the overnight session mostly 2 to 4 cents higher, with some scattered selling seen in deferred contracts.
  • Traders still have yesterday's USDA reports on their minds. Despite an increase in all wheat production, USDA trimmed 2013-14 carryover from last month to reflect an increase in exports to China.
  • Traders are discounting news from China's National Bureau of Statistics the country will harvest a record 115.67 MMT of winter wheat this year. Recent large purchases made by the country indicate this figure may be inflated.
  • With winter wheat harvest wrapping up in Kansas this week, traders believe the bulk of harvest-related hedge pressure should now be behind the market.
  • But it will be difficult for wheat to become the market leader without support from neighboring corn and soybean markets.


Live cattle futures are called to open steady to weaker in response to a softer tone in the boxed beef market.

  • Following yesterday's choppy day of trade, live cattle are called to open weaker as nearbys are trading at a premium to last week's $119 cash cattle trade.
  • Choice boxed beef values slipped 35 cents yesterday and Select declined $1.34 and movement slowed to 194 loads.
  • As a result, general expectations are for steady-at-best cash cattle trade later today. Asking prices and bids are several dollars apart.
  • Pressure on feeder futures should be limited by tightening calf supplies and the slight setback in corn futures this morning.


Lean hog futures are called to open steady to lower on weakness in the pork cutout market.

  • Lean hog futures are expected to see followthrough from yesterday's losses as traders believe there are now clear signs the pork market has posted a seasonal high.
  • Pork cutout values slipped $1.37 yesterday to further erode packers' profit margins.
  • As a result, the cash hog market is called steady to weaker as packers have had no difficulty securing supplies this week.
  • July lean hog futures are trading at a $1 discount to the cash index. The August contract will soon become the lead-month contract; it ended yesterday at a $8 discount to the index, which should limit selling as traders even positions ahead of the weekend.
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