Ahead of the Open (VIP) -- July 19, 2013

July 19, 2013 03:13 AM
 

Corn futures are called to open 3 to 5 cents lower.

  • Corn futures ended the overnight session 3 to 5 cents lower, which was near session lows.
  • With neighboring soybean and wheat markets ending the overnight session firmer, downside risk for corn should be limited as traders work to even positions ahead of the weekend.
  • But a return to more seasonal temps this weekend across the Corn Belt, as well as forecasts for widespread showers, makes traders hesitant to do more than cover short positions.
  • Gulf corn basis is steady this morning to stand $1.65 over September futures.

 

New-crop soybean futures are called 1 to 3 cents higher, with nearbys expected to post stronger gains due to bull spreading.

  • August soybeans ended the overnight session around 10 cents higher due to tight available supplies.
  • Meanwhile, new-crop futures posted much lighter gains. Futures ended the overnight session near session lows, so key this morning will be how traders want to be positioned heading into the weekend.
  • Milder temps are forecast to return to the Corn Belt tomorrow and last through next week. The cold front is expected to spark reoccurring showers this weekend to provide some relief after an extended dry period across the western Corn Belt.
  • Gulf soybean basis is 5 cents stronger for immediate delivery to stand $1.35 over August futures, which is spurring bull spreading this morning.

 

Chicago wheat futures are called 1 to 3 cents higher, with Kansas City and Minneapolis expected to be mixed.

  • Chicago wheat ended the overnight session 1 to 4 cents higher, with Kansas City favoring a firmer tone in mixed trade and Minneapolis narrowly mixed.
  • Traders are focused on position squaring ahead of the weekend.
  • Given this week's decline in futures, key will be if funds return to cover newly established short positions.
  • But wheat futures have a lot of work ahead in order to signal lows are in place. The inability of the market to post a strong post-harvest rally despite a return to strong demand signals they are more focused on the plentiful global supply situation.
  • USDA announced a 120,000 MT SRW wheat sale to China for 2013-14 delivery.
  • Gulf SRW wheat basis is steady this morning to stand 40 cents over September futures.

 

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

  • Live cattle futures are expected to build on yesterday's late-session recovery as traders prepare for this afternoon's Cattle on Feed Report.
  • Traders look for the report to show On Feed at 97%, Placements at 94.9% and Marketings at 94.7% of year-ago levels.
  • Meanwhile, traders are still waiting on cash cattle trade to begin. With asking prices and bids several dollars apart, trade could be delayed until this afternoon.
  • The pace of decline in the boxed beef market has slowed this week, with Choice values down "just" 14 cents yesterday and Select down 5 cents. While movement has been up overall this week compared to last week, only 153 loads changed hands yesterday.
  • Feeder cattle futures are expected to be supported this morning by tightening calf supplies and weakness in the corn market.

 

Lean hog futures are called mixed amid bull spreading.

  • Nearby lean hog futures ended yesterday firmer as traders are focused on evening the discount to the cash index. Meanwhile, deferred futures were weaker due to expectations larger supplies later this year will weaken the cash market.
  • August lean hog futures ended yesterday at around a $5 discount to the cash index. Traders look for the cash market to continue softening near-term, but this still leaves some near-term upside potential for the contract.
  • Packers' profit margins slipped further into the red after pork cutout values declined 89 cents yesterday. Movement also moderated to 310 loads.
  • Upside potential for futures will be limited by the cash hog market, which is called steady to $1 lower.
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