Ahead of the Open (VIP) -- July 3, 2013

July 3, 2013 03:16 AM
 

Corn futures are expected to open 3 to 5 cents higher on short-covering.

  • Corn futures ended the overnight session 4 to 5 cents higher on short-covering and news of Chinese corn purchases.
  • Key will be if funds return as active buyers or if traders continue to lighten their long exposure to the market ahead of the July Fourth holiday.
  • Trade sources say China recently booked three cargoes of new-crop U.S. corn as prices were cheaper than domestic supplies. This signals U.S. corn has reached "value" levels.
  • Meanwhile, traders view the near-term weather forecast as non-threatening, which will limit buying to short-covering for new-crop futures.
  • Gulf corn basis is 4 cents firmer for immediate delivery to stand 44 cents over July futures.

 

Soybean futures are called to open 10 to 20 cents higher on short-covering.

  • Soybean futures ended the overnight session with double-digit gains, with nearbys leading the way amid bull spreading due to tight old-crop supplies.
  • While old-crop futures continue in the steep uptrend from the June low, new-crop futures have trended lower during this same period and are enjoying short-covering this morning.
  • Focus in the market today will be on evening positions ahead of the key July Fourth period.
  • Non-threatening weather will make it difficult for traders to rebuild long positions unless a wave of fresh demand news surfaces.
  • Gulf soybean basis is 2 cents firmer for immediate delivery to stand 64 cents over July futures, with basis for deferred delivery steady.

 

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

  • Wheat futures at all three exchanges enjoyed gains overnight, with Chicago leading the way by posting gains of 6 to 12 cents.
  • Wheat futures were supported overnight by reports that China has booked around 700,000 MT to 800,000 MT of "overseas wheat" on the price break.
  • If realized, fresh demand news of this magnitude would help the market build a base of support and secure a harvest low.
  • This morning USDA has confirmed purchases of 360,000 MT of U.S. SRW wheat for 2013-14.
  • Winter wheat harvest is thought to have crossed the halfway point by this time, which has traders anticipating the bulk of hedge-related pressure is now behind the market.
  • Gulf SRW wheat basis is 4 cents firmer this morning to stand 44 cents over July futures to suggest a pickup in demand.

 

Live cattle futures are called steady to weaker on light followthrough pressure.

  • Live cattle futures softened into the close yesterday to post slight losses, raising the risk of followthrough pressure this morning.
  • But pressure should be limited as traders are still anticipating at least steady cash cattle trade given this week's tighter showlist.
  • But the boxed beef market has been unimpressive this week. Choice values firmed 46 cents and Select rose 84 cents yesterday, but movement was lackluster at just 168 loads.
  • No active bidding has been reported, which suggests cash trade will likely be delayed until after July Fourth.
  • Feeder cattle futures are vulnerable to profit-taking as well as strength in the corn market.

 

Lean hog futures are called steady to lower on weakness in the pork cutout market.

  • Lean hog futures are vulnerable to followthrough from yesterday's losses, although futures came well off session lows into the close.
  • But traders are concerned about the cash hog market after pork cutout values slipped another $1.56 yesterday. Movement improved to 384.58 loads of cuts and 21.17 loads of trim, but cutout values have slipped more than $4 from their late-June peak.
  • The cash hog market is expected to be mostly steady today, but a mixed tone could develop due to variable demand.
  • Some plants are in need of additional supplies, while others have scaled back kill requirements due to the holiday.
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