Ahead of the Open (VIP) -- June 20, 2013

June 20, 2013 03:22 AM
 

Negative outside markets have created a "risk-off" environment in the commodity sector. The U.S. dollar rose sharply yesterday and is seeing strong followthrough buying this morning. While the Federal Open Market Committee statement released yesterday afternoon provided no mention about tapering of the Fed's monthly bond-buying program, Fed Chairman Ben Bernanke at his press conference said the Fed in the coming months will likely back off its purchases.

Corn futures are called to open 5 to 10 cents lower on followthrough selling and negative outside markets.

  • Corn futures ended the overnight session 7 to 9 1/2 cents lower on profit-taking following yesterday's gains and from negative outside markets.
  • Adding to the negative tone is this morning's Weekly Export Sales Report, which showed sales of 133,400 MT for 2012-13 and 77,100 MT for 2013-14, which were at the low end of expectations.
  • Adding to demand concerns is news that U.S. corn accounted for 40.8% of Japan's corn purchases in April, which is down from 83.7% last year as the country's seeks cheaper feed alternatives.
  • Gulf corn basis is steady to 1 cent lower for nearby delivery to stand $1.00 over July futures.

 

Soybean futures are called to open 15 to 20 cents lower on negative outside markets and profit-taking.

  • Soybean futures ended the overnight session 14 to 20 cents lower as negative outside markets triggered profit-taking.
  • Key this morning will be if funds come in with stepped up selling, as the start of daytime trade has brought increased price volatility so far this week.
  • This morning's Weekly Export Sales Report showed soybean sales of 52,600 MT for 2012-13 and 108,500 MT for 2013-14 -- coming in well below expectations.
  • Adding to the negative tone is China's preliminary HSBC flash purchasing managers' index, which has dropped to a 10-month low to signal weak domestic and export demand.
  • Gulf soybean basis is steady for immediate delivery to stand 80 cents over July futures, but has risen by a dime for early September delivery to stand $1.10 over November futures.

 

Wheat futures are called to open 5 to 10 cents lower on negative outside markets and spillover from neighboring pits.

  • Chicago futures ended the overnight session 9 to 14 cents lower, with Kansas City down mostly 9 cents. Minneapolis wheat ended 2 to 4 cents lower.
  • This morning's Weekly Export Sales Report is neutral for the wheat market, as it showed sales 432,700 MT for 2013-14 and 2,000 MT for 2014-15 -- coming within expectations. Exports of 619,100 MT were reported.
  • Strategie Grains has raised its EU wheat crop forecast by 600,000 MT from last month to 131.5 MMT.
  • Taiwan has made its first known purchase of U.S. wheat since the GMO discovery in Oregon with a purchase of 85,500 MT. And while Japan purchased 152,321 MT of wheat in its weekly tender -- including 64,993 MT of U.S. supplies -- it was the fourth straight week that no purchases of U.S. western white wheat were made.
  • Meanwhile, harvest is progressing, with the Kansas Association of Wheat Growers issuing the first wheat harvest report of the season yesterday. It says harvest is in full swing in several south-central locations.
  • Gulf SRW wheat basis is down 4 cents for immediate delivery to stand 36 cents over July futures.

 

Live cattle futures are called to open mixed as traders wait on cash cattle trade to begin.

  • Live cattle futures are expected to be mixed after traders moved nearby futures in line with last week's $120 cash cattle trade with yesterday's strong gains.
  • Followthrough buying after yesterday's gains in live cattle futures would hint of a near-term low being posted.
  • Choice boxed beef values slipped $1.26 yesterday and Select rose 30 cents to further narrow the spread. Movement of 225 loads was solid, but not strong enough to improve packer demand for cash cattle.
  • Traders will begin to more actively even positions ahead of tomorrow afternoon's Cattle on Feed Report, which is expected to show On Feed at 96.5%, Placements at 95.9% and Marketings at 97.9% of year-ago levels.

 

Lean hog futures are called to open mixed on a combination of strong technicals and profit-taking.

  • Lean hog futures posted strong gains yesterday, but finished near session lows on late-session profit-taking. Futures are expected to be choppy today as traders reevaluate positions.
  • But pressure should be limited after pork cutout values improved 92 cents yesterday on strong movement of 387.12 loads of cuts and 20.43 loads of trim to reflect a pickup in demand.
  • While packers' profit margins are in the black, demand for cash hogs is light due to tighter market-ready supplies, which has caused packers to trim kill hours.
  • The cash market is expected to be mostly steady again today.
  • July lean hog futures ended yesterday at nearly a $4 discount to the cash index, signaling there is more near-term upside potential for this market.
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