Ahead of the Open (VIP) -- July 30, 2013

July 30, 2013 03:18 AM
 

Corn futures are called to open 2 to 4 cents higher this morning.

  • Corn futures closed out the overnight session mostly 3 to 4 cents higher amid light short-covering. Ideas the downside has been overdone should fuel more short-covering this morning, though gains will be hard-fought given bearish attitudes and non-threatening weather forecasts.
  • The 10-day weather forecast continues to call for below-normal temps and normal to above-normal rainfall over most of the Corn Belt. As a result, the corn crop will continue to pollinate under non-stressful conditions.
  • USDA's weekly crop ratings showed no change, with 63% of the crop rated "good" to "excellent." But when plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), the corn crop dropped 1 point.
  • South Korean feed makers continue to buy corn on the price drop, but the Black Sea region remains the origin of choice due to lower prices than U.S. supplies. South Korea bought another 50,000 MT of Black Sea origin corn overnight.

 

Soybean futures are called mostly 2 to 5 cents higher on the drop in condition ratings.

  • Soybean futures ended mostly 3 to 6 cents higher overnight amid corrective buying after a slight drop in crop condition ratings.
  • USDA's weekly crop conditions ratings showed a 1-percentage-point drop in the "good" to "excellent" categories for soybeans. Traders expected crop ratings to be unchanged. When USDA's ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale), there was also a 1-point decline.
  • Forecasts continue to call for below-normal temps and above-normal precip through the 10-day window. As a result, traders deem weather to be non-threatening, though the delayed crop needs warmth and sunshine to promote development.
  • USDA announced a daily sale of 290,000 MT of soybeans to an unknown destination for 2013-14.

 

Wheat futures are expected to open the day session mostly 2 to 5 cents higher.

  • SRW futures paced price strength overnight, ending mostly 3 to 5 cents higher. HRW and HRS futures were around 2 cents higher overnight.
  • Japan announced it is officially lifting its ban on U.S. western white wheat and U.S. soft white feed wheat. Japan's weekly tender included 89,579 MT of U.S. western white wheat, the first tender for that "flavor" since late May.
  • In addition to more Japanese demand, other global importers are stepping up purchases. Taiwan purchased a total of 97,200 MT of U.S. wheat in two separate tenders overnight.
  • There's talk of reduced grain quality from this year's SRW crop as late-season rains caused some sprouting. That may support demand for high-quality SRW supplies, but it's not typically a good thing when overall crop quality is poorer.

 

Live cattle futures are called to open slightly weaker. Feeder cattle are also called lower this morning.

  • Live cattle futures are expected to face light selling pressure as traders wait to see how this week's cash cattle trade will likely shake out. Nearby live cattle futures are trading at a premium to the bulk of last week's cash trade, which limits buying interest in futures.
  • While traders have hopes for higher cash trade, the boxed beef market got off to a sluggish start Monday. Boxed beef prices were weaker Monday and movement was light. If that continues, packers will be reluctant to raise cash cattle bids.
  • Showlist estimates are also higher this week, especially in Nebraska, where cash cattle prices were the strongest last week.
  • Feeder cattle futures are expected to face profit-taking pressure today as live cattle are seen trading with a weaker tone while corn futures are firmer.

 

Lean hog futures are called to open under pressure.

  • Lean hog futures are likely to face selling pressure this morning as traders feel the upside was exhausted with last week's corrective gains. Hog futures will also face pressure from the cash market.
  • Cash hog bids are called steady to weaker this morning on limited packer demand as they try to improve cutting margins.
  • The pork cutout value was 10 cents higher Monday, the fourth consecutive day of gains, and may be putting in a short-term low. But seasonals point to heavier price pressure later this year as hog/pork supplies build.
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