Ahead of the Open (VIP) -- July 17, 2013

July 17, 2013 03:15 AM
 

Corn futures are called to open 1 to 5 cents lower after softening in overnight trade.

  • Corn futures started the overnight session with slight gains but failed to build on the light followthrough buying.
  • Instead, corn is seeing light profit-taking as traders gauge the weather. Another couple of days of hot temps are forecast for the Corn Belt before a cold front moves in this weekend to provide some relief.
  • But forecasters now say weather models aren't as wet this weekend as previously indicated. As a result, price action could become increasingly choppy as traders wait on midday weather models.
  • General expectations are crop conditions are declining this week, which is helping to limit pressure from less threatening weekend weather forecasts.
  • Gulf corn basis for immediate delivery has softened by 5 cents to stand $1.85 over September futures.

 

Soybean futures are called mixed amid bull spreading, with new-crop expected to be mostly 2 to 4 cents lower.

  • Front-month August soybean futures ended the overnight session marginally lower, but new-crop futures ended the overnight session 4 to 5 cents lower.
  • New-crop soybean futures started the overnight session with slight gains but then saw light profit-taking pressure.
  • Key this morning will be whether funds return as net buyers.
  • Traders are keeping a close eye on the weather, especially since hot temps across the Corn Belt this week are increasing stress and moisture needs of the soybean crop.
  • A cold front is expected to provide relief from high temps by the weekend, but weather models are not in agreement about rain chances.
  • Meanwhile, China's foreign direct investment surged 20.12% over year-ago last month -- the highest level since March 2011, states its commerce ministry. Despite a slowdown in the Chinese economy, investors believe this report signals growing confidence in the economy and is positive for commodities.
  • USDA announced this morning that China purchased 165,000 MT of U.S. soybeans for 2013-14.
  • Gulf soybean basis is steady this morning for immediately delivery to stand $1.25 over August futures, but it has slipped by 10 cents for early August delivery to reflect softening demand.

 

Wheat futures are expected to favor a firmer tone in narrowly mixed trade to start the day.

  • Chicago wheat ended the overnight session marginally to 2 cents higher, with Kansas City wheat narrowly mixed and Minneapolis mostly 1 to 2 cents higher.
  • Wheat futures didn't stray too far from unchanged in overnight trade, with gains coming on short-covering after futures slipped in late trade yesterday.
  • While the U.S. has benefited from a recent surge in demand, traders don't see this improved demand pace continuing. Therefore, proof of continued strong demand is needed to secure a post-harvest low.
  • Trade sources report China is reportedly pricing at least 500,000 MT of Australian milling wheat. Recently China has purchased around 3 MMT of wheat, mostly from the U.S., Australia and France. While China's wheat crop is expected to be larger this year, much of the crop is expected to be feed grade.
  • Gulf SRW wheat basis is steady this morning for immediate delivery to stand 38 cents over September futures.

 

Live cattle futures are called to open mixed as traders wait on direction from the cash market.

  • Futures are expected to see another choppy day of price action following yesterday's narrowly mixed close.
  • Traders are waiting on direction from the cash cattle market, especially since August live cattle are trading at around a $3 premium to last week's $119 cash trade.
  • Cash trade is expected to be delayed until later in the week as asking prices and bids are several dollars apart.
  • Packers are offering lower bids and feedlots want at least $120 for cattle due to tighter market-ready supplies.
  • Meanwhile, traders are also beginning to prepare for Friday's Cattle on Feed and Cattle Inventory Reports. Traders expect the reports to show a shrinking beef supply.

 

Lean hog futures are called to open steady to higher on followthrough from yesterday's gains.

  • Following yesterday's slight to moderate gains, lean hog futures are expected to benefit from short-covering.
  • A high-range close today could signal the potential of a near-term low being in place as marked by the one-day island bottom on July 12.
  • While the CME lean hog index has steadily declined over the last week, August lean hog futures still hold around a $6 discount to the cash index. This is helping to lift futures more in line with the index.
  • Pork cutout values slipped 98 cents yesterday to push packers' profit margins back into the red. But movement improved to 435.9 loads.
  • The cash hog market is called steady to $1 lower amid light demand, which should limit buying in lean hog futures to corrective trade.
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