Ahead of the Open (VIP) -- July 1, 2013

July 1, 2013 03:13 AM
 

Corn futures are called 2 to 5 cents lower on light followthrough from Friday's losses in new-crop contracts.

  • Corn futures ended the overnight session 2 to 5 cents lower, with new-crop futures leading losses on followthrough from Friday's sharp losses.
  • Traders are still digesting USDA's surprising increase in planted corn acres from its March intentions report. The report reduced traders' concerns about drowned-out and prevent plant corn acres as it signals producers understated their intentions in March.
  • But Friday's Grain Stocks Report reflected a tight old-crop corn supply situation, which could lead to more bull spreading today.
  • The near-term weather forecast is non-threatening, which could accelerate price pressure as we near the key July Fourth timeframe.

 

Soybean futures are called slightly to sharply higher amid bull spreading.

  • Old-crop beans ended the overnight session 20 to 30 cents higher, with September up 11 cents. New-crop futures were 4 to 7 cents higher.
  • Traders still have USDA's bullish Grain Stocks Report on their minds, which reflected stronger-than-expected soybean use in the last quarter. This has raised traders' concern about rationing remaining supplies in the last quarter of the marketing year.
  • July beans saw trade above $16.00 in overnight trade, which sets the stage for fresh chart-based buying in daytime trade as funds return to reestablish positions to start the month.
  • But a non-threatening near-term weather outlook could limit buying in new-crop contracts as the week progresses.
  • November beans gapped lower to start the overnight session, but filled the gap and saw light short-covering in late trade. The near-term downtrend remains intact for the contract.

 

Wheat futures are called to open 1 to 3 cents higher on short-covering.

  • Wheat futures ended the overnight session mostly 1 to 2 cents higher, although some scattered selling was seen in deferred contracts.
  • Wheat futures started the overnight session weaker on followthrough from Friday's losses, but found some short-covering on spillover from soybean futures.
  • A pickup in harvest progress across Kansas could result in accelerated hedge-related pressure this week, although harvest reports reflect mixed yield results.
  • Friday's reports were mixed for the wheat market, as they reflected stronger-than-expected quarterly wheat usage and more planted spring wheat acres than traders expected.
  • Recent demand improvements could help wheat secure a harvest low, but traders will be hesitant to reestablish long positions unless new-crop corn and soybean contracts signal lows have been posted.

 

Live cattle futures are expected to see a mixed tone this morning as traders reevaluate positions.

  • Live cattle futures were weaker on Friday, but for the week posted gains to signal the market is working on posting a near-term low.
  • But to confirm a low is in place, the market needs to see fresh buying early this week.
  • The cash cattle market was mostly steady last week, trading at $120. August live cattle are now the lead-month contract and ended last week at around a $2 premium to the cash market.
  • All eyes will be on the boxed beef market early this week for cash market clues. Values were mixed on Friday and movement slowed to 111 loads.
  • Feeder cattle futures could favor a weaker tone this morning due to light pressure in the corn market.

 

Lean hog futures are called to open mixed as traders return their focus to the cash market.

  • Lean hog futures were sharply lower to end the week as traders expected Friday's Hogs & Pigs Report to reflect mild expansion.
  • The H&P Report didn't provide any big surprises and is viewed as neutral for prices this morning, as it showed All Hogs & Pigs, Kept for Breeding and Kept for Marketing even with year-ago levels.
  • Traders are keeping a close eye on the pork cutout market for signs of topping. But belly prices surged again on Friday to lift the overall carcass value 53 cents to keep packers' profit margins in the black.
  • The cash hog market is expected to be mostly steady this morning, but some firmer tones could develop as most plants are still in need of additional hogs for late-week delivery.
  • July lean hog futures ended last week at about a $2 discount to the cash index, which signals traders are cautious about near-term cash prospects.
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