Ahead of the Open (VIP) -- July 8, 2013

July 8, 2013 03:18 AM
 

Corn futures are called 2 to 4 cents higher on short-covering.

  • Corn futures ended the overnight session mostly 2 to 4 cents higher, although far deferred futures were mixed.
  • Key this morning will be whether or not floor traders return from the holiday to extend short positions in new-crop contracts or if they view the downside as overdone.
  • History suggests there is more near-term downside risk given Friday's sharp price pressure, especially since more technical chart damage was done July 5.
  • Traders view near-term weather as non-threatening as above-normal temps across the Corn Belt aren't forecast to last.
  • Showers are in the forecast early and later this week, with a cold front bringing a return to more normal temps by midweek.
  • Pressure on July corn should be limited by tight old-crop supplies.
  • Also this morning, USDA announced Mexico purchased 120,000 MT of new-crop corn, signaling prices are at value levels.

 

Soybean futures are called to open slightly to 10 cents higher as traders reevaluate positions.

  • Soybean futures ended the overnight session slightly to 12 cents higher on short-covering and bull spread unwinding following Friday's sharp losses in new-crop contracts.
  • November soybean futures gapped lower to start the overnight session to do more near-term technical chart damage, although that was followed by short-covering.
  • Post-Indpendence Day price losses signal there is more near-term downside risk for the market.
  • Traders generally expect this afternoon's crop condition data from USDA to reflect slight improvement in the crop.
  • Traders view the near-term weather forecast as non-threatening. The NWS forecast for July 13-17 calls for above-normal temps across the eastern Corn Belt and normal to above-normal temps for the western Belt, along with mostly normal precip.
  • USDA announced an unknown buyer purchased 135,000 MT of soybeans and China purchased 120,000 MT -- all for 2013-14. This signals new-crop prices are at value levels.

 

Chicago and Kansas City futures are called 2 to 4 cents higher on short-covering, with Minneapolis futures mixed.

  • Chicago and Kansas City wheat futures were mostly 1 to 2 cents higher to end the overnight session, with Minneapolis futures mostly a penny lower in mixed trade.
  • On top of large purchases announced last week, USDA announced this morning that China purchased 840,000 MT SRW wheat for 2013-14.
  • Wheat futures remain in a follower's role and are closely watching price action in the corn market.
  • With the bulk of harvest-related hedge pressure likely behind the market and demand picking up, further downside risk should be limited unless corn and soybean prices continue to deteriorate.
  • Reuters is reporting this morning that Japan plans to resume purchases of U.S. western white wheat sometime in August.
  • The Institute for Agricultural Market Studies (IKAR) has cut its Russian wheat forecast due to dry weather across key production regions from 54 MMT to 52.4 MMT.

 

Live cattle futures are called mixed as traders return from the holiday.

  • Live cattle futures were choppy last week as traders reevaluated positions ahead of the holiday.
  • With traders returning this morning, all eyes will be on the boxed beef market to gauge weekend beef clearance.
  • If beef movement is strong today, it will signal retailers plan to continue featuring beef. But if movement is slow, it will signal retailers plan on pork and poultry features.
  • Buying in live cattle this morning will be limited as traders are disappointed by light cash cattle trade at $119 last week, which is down $1 from the previous week.
  • Technicals strongly suggest feeder futures have posted a near-term low, but buying this morning will be limited by short-covering in the corn market.

 

Lean hog futures are called to open mixed as traders gauge pork demand.

  • Lean hog futures are expected to see a choppy start, but pressure will be limited by expectations for steady to firmer cash hog bids.
  • Many packers are short bought after the holiday and are in need of supplies early this week. But with packer margins tight, upside potential in futures will be limited.
  • July lean hog futures ended last week at about a $1 discount to the cash index, which signals traders are leery about lasting cash hog strength.
  • Traders will gauge the pork market today for indications of retailers post-holiday feature plans. A pickup in pork movement is needed to re-energize bullish attitudes.
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