Ahead of the Open (VIP) -- July 9, 2013

July 9, 2013 03:17 AM
 

Corn futures are called mostly 8 to 11 cents higher, though smaller gains are likely in some of the far-deferred contracts.

  • Corn futures ended the overnight session with gains of 8 to 11 cents through the July 2014 contract. Opening calls this morning are in line with the overnight price action.
  • Yesterday's corrective bounce pushed December corn futures back above $5.00, sparking followthrough buying overnight.
  • Also, global end-user demand picked up on the recent price break, suggesting futures have dropped to a "value" level.
  • USDA's weekly crop condition ratings showed a 1-percentage-point increase in the "good" to "excellent" categories over the past week. That equated to a 2-point rise when plugged into the weighted Pro Farmer Crop Condition Index.
  • Despite the crop improvement and rains that are pushing across the western Corn Belt this morning, traders are showing some concern with forecasts for hot temps the second half of the month. That's when the majority of the Corn Belt crop will pollinate.

 

Soybean futures are called to open 18 to 23 cents higher this morning.

  • Soybean futures ended the overnight session with strong gains of 20-plus cents in most contracts. That's leading to similar calls for the reopening of trade at 8:30 a.m. CT.
  • The short-covering bounce that started yesterday is continuing as traders feel the recent price slide was overdone.
  • USDA's weekly crop condition ratings showed no change in the percentage of crops rated "good" to "excellent." Traders had expected a 1-percentage-point increase. There was also no change in the weighted Pro Farmer Crop Condition Index.
  • Traders are keeping a close watch on the mid-range forecast as some are calling for above-normal temps the second half of July, which could stress the late-developing crop.
  • Conab, the supply agency of the Brazilian government, modestly raised its soybean crop estimate to a record 81.5 MMT from 81.3 MMT previously. But this will have limited market impact as traders have known for a long time Brazil had a record crop.

 

Chicago and Kansas City wheat futures are called 9 to 13 cents higher, while Minneapolis wheat is seen opening mostly 6 to 10 cents higher.

  • Chicago and Kansas City wheat futures posted double-digit gains in most contracts overnight, while Minneapolis wheat posted slightly lesser gains. Futures finished on session highs, signaling bulls will have the solid upper hand this morning.
  • Traders are still reacting to recent strong Chinese purchases. USDA has confirmed 1.32 MMT of Chinese purchases of U.S. SRW wheat over the past week.
  • Additional support is coming from short-covering as seasonal pressure eases and amid ideas the downside has been overdone.
  • Russian officials signal dryness in some production areas may trim this year's wheat crop, though the official forecast has not been lowered. It remains at 54 MMT.

 

Live cattle futures are called mixed. Feeder cattle are also likely to be choppy.

  • Live cattle futures are seen opening with a mixed tone in choppy trade. With futures at a premium to the cash market, buying interest will be limited. But traders sense a period of price strength lies ahead once the cash and product markets bottom.
  • Choice boxed beef prices were $1.49 lower and Select cuts dropped $2.60 Monday, while packers moved only 143 loads of product on the day. The poor start to the week doesn't give traders any indication the product market has found a short-term low.
  • Until the boxed beef market shows signs of bottoming, traders will have no confidence of the cash cattle market strengthening.
  • Feeder cattle are expected to open mixed amid limited direction from live cattle, though a firmer tone in corn may cause mild price pressure.

 

Lean hog futures are seen opening steady to slightly firmer this morning.

  • Lean hog futures are expected to see modest short-covering following yesterday's sharp losses through the December contract. But buying will be limited to mild corrective buying despite the discount summer-month contracts hold to the cash index.
  • Packers are expected to pay steady to firmer bids for cash hogs across the Midwest as market-ready supplies are tight and they need slaughter supplies. But traders sense a seasonal top in the cash market is near as supplies will begin to build.
  • The pork cutout value was 96 cents higher Monday, though packers moved only 240.3 loads of product on the day. Traders also feel the product market is working on a seasonal top.
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