Ahead of the Open (VIP) -- June 24, 2013

June 24, 2013 03:17 AM
 

Corn futures are called to open 7 to 15 cents lower on a "rain makes grain" attitude.

  • Corn futures gapped lower to start the week and extended losses through overnight hours. Futures ended the overnight session mostly 11 to 13 cents lower, with the exception being the front-month July contract that was 7 cents lower.
  • While too much rain has some producers concerned about stands and general crop health, the market continues to have a "rain makes grain" attitude. More rains are in the near-term forecast.
  • Sunday's National Weather Service 6-to 10-day forecast calls for below-normal precip across the western Corn Belt and above-normal precip across the eastern Corn Belt.
  • Negative outside markets are adding to pressure on commodity futures this morning, as the U.S. dollar index continues to move higher on concerns about China's economic health.
  • Gulf corn basis is 5 cents weaker for immediate delivery to stand 93 cents over July futures, although basis for early July delivery firmed by a penny.

 

Soybean futures are called 10 to 15 cents lower on negative outside markets and weekend rains across the Corn Belt.

  • Soybeans ended the overnight session 9 to 14 cents lower in all but the front-month July contract, which ended 5 cents lower amid bull spreading.
  • Strength in the dollar is weighing on the commodity markets this morning after the People's Bank of China told the country's largest banks to rein in risky loans to improve their balance sheets. This rattled global markets overnight.
  • Adding to the negative tone in the bean pit this morning are weekend rains and more in the forecast.
  • Traders expect a large portion of unplanted soybean acres were seeded last week; this afternoon's progress data will provide another read to the situation.
  • November soybean futures are pivoting around the $12.60 level, which closely coincides with a 50% retracement of the rally from the April low to the June high.
  • Gulf soybean basis is 8 cents firmer for immediate delivery to stand 92 cents above July futures, which suggest fresh demand is surfacing.

 

Chicago and Kansas City wheat futures are called to open 6 to 10 cents lower, with Minneapolis down 2 to 3 cents.

  • Wheat futures ended the overnight session under pressure, with losses in the Minneapolis market limited by concerns about the spring wheat crop.
  • Strength in the dollar index weighed heavily on Chicago and Kansas City wheat futures as it contributed to overall weakness in the commodity markets overnight.
  • Key this morning will be if funds extend short positions after overnight losses.
  • Traders are also noting that after a delayed start, harvest activity in Kansas picked up over the weekend, which is adding to weakness in winter wheat futures.
  • Gulf SRW wheat basis softened by 3 cents for immediate delivery to stand 33 cents over July futures.

 

Live cattle futures are called to open mixed as traders sort through fundamentals.

  • Live cattle futures are expected to get a mixed start, with buying limited by a slightly negative Cattle on Feed Report and selling limited by positive cold storage data.
  • The COF Report showed On Feed at 97%, Placements at 98% and Marketings at 97% of year-ago levels. While all below year-ago levels, traders expected an even steeper drop the On Feed category.
  • But the Cold Storage Report eased traders' concerns about beef demand, as it showed beef stocks at the end of May down 6.2% from the previous month and down around 4% from year-ago levels.
  • Meanwhile, lackluster cash cattle trade last week at mostly steady levels of $120 in the Central and Southern Plains means this week's showlist is likely larger. But packer demand for cash supplies could improve after back-to-back weeks of lackluster cash cattle trade.

 

Lean hog futures are called to open steady to firmer on support from a positive Cold Storage Report.

  • Lean hog futures are expected to see a boost from strength in the pork cutout market and better-than-expected Cold Storage Report data.
  • Pork cutout values improved $1.60 on Friday to lift packers' profit margins, although movement was moderate at 258.97 loads of cuts and 11.48 loads of trim.
  • USDA reports total frozen pork stocks at the end of May dropped 5.6% from the previous month and were smaller than traders feared. However, pork stocks came in 4.1% above year-ago levels, which still represents a plentiful supply situation.
  • Meanwhile, the cash hog market is called steady to firmer this morning amid improved demand for cash hogs due to tight supplies.
  • July lean hog futures ended last week at around a $4 discount to the cash index, which opens fresh upside potential for nearby futures.
  • But negative outside markets could temper buying in the livestock markets this morning.
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