Ahead of the Open (VIP) -- July 23, 2013

July 23, 2013 03:17 AM
 

Corn futures are called to open 5 to 8 cents lower.

  • Corn futures ended the overnight session 6 to 7 cents lower despite a drop in crop condition ratings from week-ago.
  • When USDA's weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), the corn crop dropped 5 points. But the price pressure overnight signals traders feel the downtick in condition ratings is temporary.
  • Traders also feel the near-term weather outlook is non-threatening as the first wave of pollination starts across the Corn Belt. Temps are expected to run below normal and scattered rains are forecast into early next week.
  • USDA announced daily corn sales totaling 106,400 MT to Mexico. Of that total, 11,000 MT is for 2012-13 and 95,400 MT is for 2013-14.
  • December corn futures are leaning on key near-term support at $4.90. A drop below that level could trigger sell stops. Next strong daily chart support is at $4.74.

 

Soybean futures are expected to open with a narrowly mixed tone this morning.

  • Soybean futures finished mixed overnight. The August contract was 5 1/2 cents lower, while deferred futures were fractionally lower to 2 cents higher.
  • Weekly crop condition ratings showed a 1-percentage-point decline in the "good" to "excellent" categories from week-ago. When USDA's crop ratings are plugged into the weighted Pro Farmer Crop Condition Index, the bean crop slipped 1 point to 362.
  • Near-term forecasts feature below-normal temps and scattered rain chances into early next week. But traders are showing some concern with slowed crop development, especially in Iowa and Minnesota -- the No. 1 and No. 3 soybean production states.
  • Technically, November soybean futures are right in the middle of the established, choppy trading range.

 

Chicago and Kansas City wheat are called 2 to 5 cents lower. Minneapolis wheat is expected to open with a mixed tone.

  • Chicago and Kansas City wheat futures followed the corn market lower overnight, while Minneapolis futures were mixed with a slight downside bias.
  • Price action in the corn market continues to have the biggest influence on wheat as traders wait to see if enough demand news surfaces for wheat to put in a seasonal low.
  • While global wheat demand is perking up, supplies from other exporters (primarily the Black Sea region) are priced under U.S. wheat. Taiwan did tender for 97,200 MT of U.S. milling wheat overnight. But traders want to see a big tender or purchase.
  • USDA's weekly crop condition ratings showed a 2-percentage-point decline in the "good" to "excellent" categories for spring wheat. When plugged into the weighted Pro Farmer Crop Condition Index, the spring wheat crop dropped 3 points to 371.
  • Traders will be focusing on field reports from the Wheat Quality Council's HRS tour, which kicks off this morning. Final Day 1 results will be released this evening.

 

Live cattle futures are called to open slightly firmer. Feeder cattle are also expected to be firmer this morning.

  • Light and potentially choppy trade is likely in the live cattle market this morning. Futures are trading at a premium to the cash market and traders are waiting on a low in the cash and product markets. But they feel the market should strengthen seasonally.
  • Beef stocks in frozen storage as of June 30 came in 6.6 million lbs. higher than the average pre-report guess at 480.6 million pounds. But that data should have limited impact on trade today as focus is on the boxed beef and cash cattle markets.
  • Boxed beef prices were lower Monday and movement was light, signaling the product market is still working to put in a short-term low.
  • While the product market is reeling, there is some hope of firmer cash cattle trade in the Plains this week as showlist numbers are down, especially in Texas.
  • Feeder cattle futures are expected to pull support from weakness in the corn market. But the big premium futures hold to the cash index could limit buying interest, especially if buying in live cattle is light.

 

Lean hog futures are called to open higher.

  • USDA's Cold Storage Report showed pork stocks in frozen storage as of June 30 well below expectations at 564.9 million pounds. That will support lean hog futures this morning as it implies demand was stronger than believed last month.
  • The bullish pork stocks figure will encourage traders to narrow the discount futures hold to the cash index, especially the August contract.
  • The cash hog market is expected to be steady to weaker again today as packers are well supplied on slaughter needs for the week and will work to improve margins.
  • The pork cutout value inched 7 cents higher Monday, but movement was light at just 232.6 loads.

 

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