Ahead of the Open (VIP) -- July 15, 2013

July 15, 2013 03:17 AM
 

Corn futures are called to open 5 to 10 cents lower on less-threatening weather.

  • Corn futures ended the overnight session mostly 7 to 8 cents lower, which was mid-range for the session.
  • Weather models are less threatening for this week and call for a return to widespread showers across the Corn Belt next week.
  • Sunday's NWS outlook for July 20-24 calls for normal to below-normal temps and above-normal precip from Iowa eastward, while drier conditions are expected in Nebraska.
  • The cooler extended forecast makes traders much less concerned about late-pollinating corn.
  • December corn spent the overnight session pivoting around the key $5.00 level that has spurred fresh demand in the past.
  • Demonstrating prices are rebuilding demand, USDA announced an 120,000-MT corn sale to an unknown destination for 2013-14.
  • Gulf corn basis for immediate delivery stands $1.90 above September futures, but has slipped by 10 cents for early August delivery.

 

New-crop soybean futures are called to open 2 to 4 cents lower on less threatening weather, with old-crop up slightly amid bull spreading.

  • August beans were 1 3/4 cents higher at the end of the overnight session, with new-crop down mostly 4 cents amid bull spreading.
  • Overnight weather models are less threatening for this week and call for a return to rain by the weekend. While temps are expected to be above-normal this week, excessive heat is not in the forecast.
  • China's second quarter GDP came in as expected to show growth of 7.5%, which reflects a slowdown from the previous quarter of 7.7%. Reaction overnight to the news was muted.
  • November beans gapped lower to start the week and later filled the gap to trade in positive territory. But the contract weakened to end near opening levels and just above the key $12.50 level.
  • Key this morning will be if funds view early weakness as a buying opportunity or shy away from the market.
  • Gulf soybean basis for immediate delivery stands at $1.25 over August futures, but it is 5 cents stronger for early August delivery to reflect tightening supplies and possible fresh demand.

 

Wheat futures are called 6 to 12 cents lower on profit-taking.

  • Chicago wheat was the overnight price leader by posting losses mostly between 9 to 12 cents. Kansas City wheat ended the overnight session mostly 7 to 10 cents lower with Minneapolis down 5 to 8 cents.
  • Following last week's gains, traders returned to the wheat pit to take some profits out of the market.
  • Wheat is seeing spillover from neighboring corn and soybean markets, but the market was the downside leader overnight.
  • Wheat futures were bolstered last week by strong demand as China was in the market with large purchases.
  • Ideas China's buying binge is over contributed to overnight losses, as well as reports that China's wheat crop is larger than earlier expected (although China's recent large wheat purchases do not support this claim).
  • Traders expect this afternoon's crop progress report to show winter wheat harvest is on its final leg.
  • Gulf SRW wheat basis is 3 cents stronger for immediate delivery to stand 35 cents over September futures.

 

Live cattle futures are called to open steady to slightly lower based on disappointing cash cattle trade.

  • Live cattle futures are expected to start the week steady to slightly lower as traders factor in Friday's steady cash cattle trade.
  • Moderate cash volume was reported late Friday in the Central and Southern Plains at $119, which is steady with the previous week.
  • Traders are comfortable with some premium in nearby futures to the cash market as they expect tightening market-ready supplies to eventually lift the cash market.
  • But traders remain concerned about recent pressure on the boxed beef market, as Choice values slipped $1.19 on Friday and Select deteriorated $1.04 and movement was moderate at 179 loads.
  • Pressure on feeder futures should be limited to spillover from live cattle given weakness in the corn market.

 

Lean hog futures are called to open steady to weaker on a continuation of the downtrend.

  • Lean hog futures are expected to build on last week's losses and are called steady to weaker.
  • Technicals strongly suggest a high has been posted but nearby futures are trading at a discount to the cash index, which should limit pressure.
  • But traders are comfortable with some discount in nearby futures as they expect near-term cash weakness as packers work to improve margins.
  • All eyes will be on the cash market as traders were surprised that some packers were forced to raise bids late last week to secure needed supplies. Early expectations are for mostly steady bids with a mixed undertone due to variable demand.

 

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