Ahead of the Open (VIP) -- July 2, 2013

July 2, 2013 03:17 AM
 

Corn futures are expected to open 2 to 7 cents higher on short-covering.

  • Corn futures ended the overnight session marginally to 7 cents higher on short-covering, with old-crop leading gains.
  • Following yesterday's losses, corn is due for a round of corrective gains.
  • But buying is being limited as traders still have last week's larger-than-expected USDA planted acreage estimate on their mind.
  • Our weighted Crop Condition Index reflects a three-point gain in the condition of the corn crop from last week, rising to 372.70. The condition of the crop in Illinois, Indiana, Iowa, Nebraska and Ohio improved, while Minnesota's crop posted slight deterioration.
  • December corn have slipped to their lowest level since January 2011 and are hovering just above the psychological $5.00 level. Violation of that support could trigger sell stops.

 

Soybean futures are called to open 1 to 5 cents higher on short-covering.

  • Soybean futures ended the overnight session marginally to 5 cents higher amid bull spread unwinding. Futures were highly volatile yesterday and futures saw two-sided trade overnight.
  • Old-crop futures were stronger yesterday amid tight old-crop supplies, although they finished well off session lows yesterday.
  • But buying in new-crop futures is being limited to corrective trade given the non-threatening near-term weather forecast.
  • Our weighted Crop Condition Index showed the soybean crop improved by 3 points last week to 366.61, with gains noted in Illinois, Indiana, Iowa, Nebraska and Ohio. The condition of the crop in Minnesota declined slightly.

 

Wheat futures are called to open 5 to 10 cents higher on short-covering.

  • Wheat futures at all three exchanges enjoyed short-covering overnight and ended the session mostly 7 to 8 cents higher.
  • July Chicago wheat posted a fresh contract low yesterday and moved into oversold territory, which signals a time or price correction is due.
  • Yesterday's USDA progress data revealed that 43% of the winter wheat crop has been harvested and open harvest conditions this week will have many producers in Kansas wrapping up harvest efforts.
  • Meanwhile, our weighted Crop Condition Index reflected slight deterioration in the spring wheat crop, with the crop declining by 2 points to 371.47.
  • As a result, traders expect the bulk of hedge-related harvest pressure to ease this week.
  • Traders are waiting on results from an Egyptian tender for optional-origin wheat, which are expected to be announced later today.

 

Live cattle futures are called steady to weaker after a lackluster start to the boxed beef market for the week.

  • Live cattle futures finished with slight gains yesterday, but they are vulnerable to some profit-taking this morning.
  • The boxed beef market got off to a lackluster start, with Choice values down 86 cents and Select declining by $1.37. Just 137 loads of cuts and trim changed hands yesterday.
  • This week's cattle showlist is slightly lower overall due to reduced supplies in Kansas compared to last week.
  • But to build strength in the cash market from last week's $120 cash trade, the boxed beef market must improve.
  • Feeder cattle futures are vulnerable to profit-taking following yesterday's sharp gains, although technicals strongly suggest the market has posted a near-term low.

 

Lean hog futures are called to open slightly lower on followthrough pressure.

  • Lean hog futures sank into yesterday's close and are vulnerable to followthrough pressure this morning.
  • Pork cutout values slipped $1.01 yesterday due to sharp weakness in belly prices. Only 226 loads changed hands yesterday.
  • Packers' profit margins remain well in the black, which should maintain a strong demand base for cash hogs. Bids are expected to be mostly steady, but some firmer bids could develop as packers secure supplies for their holiday shortened schedules.
  • Pressure on nearby futures should be limited by the discount they hold to the cash index, although this price difference also reflects traders' attitudes the market has posted a near-term high.
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