Ahead of the Open (VIP) -- July 18, 2013

July 18, 2013 03:13 AM
 

Corn futures are called to open 2 to 5 cents lower on less threatening weather forecasts.

  • September corn ended the overnight session around 2 cents lower, with new-crop futures 3 to 5 cents lower.
  • December corn gapped below the $5.00 level to start the overnight session. Key this morning will be if funds view this as a value buying opportunity or if they see it as a sign of weakness.
  • While oppressive heat is spreading across the Corn Belt today and daily temps expected to test or reach the 100-degree mark in some areas today, forecasts for milder conditions tomorrow, accompanied by rain chances, make traders hesitant to rebuild long positions.
  • Meanwhile, this morning's weekly export sales report provided a reminder that importers see new-crop prices as a value. While sales of 152,900 MT for 2012-13 remained lackluster, sales of 1,590,800 MT for 2013-14 were impressive.
  • Strategie Grains cut its 2013-14 EU corn crop by 100,000 MT to 65.9 MMT, which is still up 15% from last year.

 

Soybean futures are expected to be 5 to 10 cents lower this morning amid profit-taking on forecasts for relief from extreme heat.

  • Soybean futures ended the overnight session mostly 3 to 7 cents lower, which was well off session lows.
  • Futures were pressured overnight by forecasts for milder temps to enter the Corn Belt by tomorrow. Additionally, widespread rains are expected over the weekend to provide relief after a stressful week of growing conditions.
  • But the ability of soybean futures to come off session lows in late overnight trade could set the stage for funds to return as active buyers this morning.
  • Meanwhile, weekly export sales were fairly neutral for the market. Sales of 110,600 MT for 2012-13 and 591,700 MT for 2013-14 came in just above the range of pre-report expectations but well above last week's total.

 

Wheat futures are called mixed after a choppy overnight session.

  • Chicago wheat ended the overnight session steady to 1 cent higher, with Kansas City and Minneapolis futures narrowly mixed. Pressure was limited by ideas yesterday's losses were overdone.
  • Look for wheat to be influenced by spillover from neighboring corn and soybean markets.
  • Strategie Grains raised its 2013-14 EU wheat forecast by 1.9 MMT from last month to 133.4 MMT. EU wheat production is now seen up 6% from 2012-13.
  • A Japanese delegation told USDA officials yesterday it needs reassurance via more testing that U.S. western white wheat is free of GMO material. Still, trade sources expect exports to resume by August.
  • Also this morning, weekly export sales of 996,600 MT represent strong demand, but came in below lofty expectations. Sales were mostly to China.

 

Live cattle futures are called to open mixed on a combination of followthrough pressure and short-covering.

  • Live cattle futures posted moderate to sharp losses yesterday and a low-range close, which raises the risk of followthrough pressure this morning.
  • But short-covering is also possible this morning as traders could view yesterday's losses as overdone.
  • Traders responded to ongoing weakness in the boxed beef market, as Choice values slipped $1.03 yesterday and Select was down 57 cents. But the good news is movement improved to 244 loads.
  • Traders also worked to narrow the premium nearby futures hold to last week's $119 cash cattle trade. This week's cash tone is more uncertain, as packers' bids and feedlots' asking prices are still several dollars apart.
  • Traders are also beginning to more aggressively even positions ahead of tomorrow afternoon's Cattle on Feed Report.
  • Pressure on feeder cattle futures this morning should be limited by weakness in the corn market.

 

Another choppy day of price action is expected in the lean hog pit.

  • Lean hog futures are expected to be mixed this morning amid spreading as traders even positions.
  • Nearby futures ended yesterday under light pressure due to weakness in the cash hog market. Cash bids are expected to be steady to weaker again this morning as packers have trimmed kill hours to improve profit margins.
  • But with August lean hog futures ending yesterday at around a $5 discount to the cash index, further downside risk should be limited.
  • Pork cutout values slipped 1 cent yesterday and movement improved to 417.9 loads.
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