Ahead of the Open (VIP) -- March 18, 2014

March 18, 2014 03:04 AM

Corn futures are called to open 1 to 3 cents higher this morning.

  • Corn futures ended the overnight session with old-crop futures 2 cents higher and new-crop futures mixed.
  • Corn traders continue to watch for signs that trade out of the Black Sea region could be disrupted in the near-term by Ukraine-Russia political tensions.
  • Underpinning the corn market's view of the Ukrainian situation is speculation that a lack of financing for spring crop plantings could sharply reduce corn production in the country, likely increasing demand for 2014-15 U.S. corn demand.
  • Corn futures also benefited from spillover support from strength in the wheat market in early morning trade.
  • Technically, yesterday's low-range close in May corn futures initiated followthrough selling in the overnight session. Since early this morning, however, corn futures have been building a potential upside reversal in old-crop futures.


Soybean futures are called 5 to 13 cents higher on followthrough buying.

  • Old-crop soybean futures finished 6 to 13 cents higher overnight, while new-crop contracts were steady to 3 cents higher.
  • Overnight trade suggests traders are returning their focus to still-strong soybean demand. Some market-watchers have even commented on yesterday's NOPA crush report that came in slightly stronger than expected as a source of support for today's market.
  • Many traders continue to watch for cancellations of U.S. soybean buys by China. However, China seems to be more focused on canceling South American origin soybeans at this time as Chinese importers negotiate with ship brokers to restructure freight deals.
  • Technically, yesterday's slightly higher close provided support for the overnight session and May futures now seem ready to test resistance at the March 13 high of $14.12 1/2.


Wheat futures are called 2 to 6 cents higher on deteriorating crop conditions.

  • All three wheat flavors ended the overnight session with modest gains.
  • Wheat traders will continue to keep a close eye on Ukraine-Russia political tensions. Don't expect traders to erase all the premium that may be tied to the tensions from the market until there is more proof that wheat trade from the region will continue to operate.
  • Yesterday's winter wheat crop condition updates from state NASS offices served as another reminder of tough growing conditions across hard red winter wheat country. In Kansas, 20% of the crop is rated poor to very poor; 52% of the Texas crop is rated in the bottom two categories.
  • Technically, May soft red winter wheat futures found support at yesterday's low, but continues to find resistance at the December high of $6.79 1/4.


Live cattle futures are called steady. Feeder cattle are expected to open with a mixed tone.

  • Yesterday's strength in the boxed beef market should translate into support for live cattle futures this morning.
  • Traders are still watching for signs of slowing wholesale beef demand. That's especially true after yesterday's $2.41 surge in heavyweight Choice boxes which pushed beef prices to a record $242.85. Beef movement, however, slowed from last week's pace, signaling retailers are beginning to show price resistance.
  • Feeder cattle futures are likely to open with a sluggish tone as corn futures trade higher.
  • Technically, April live cattle futures will be looking to recover from yesterday's session-low close, which could attract some light followthrough selling when trade gets started.


Lean hog futures are expected to open higher this morning.

  • Followthrough buying from yesterday's contract high and contract high close should bring buying back to lean hog futures this morning.
  • The hot money is chasing lean hog futures higher at this time and until the upside momentum in the market is broken, it will be difficult to turn prices to the downside for any extended downside correction.
  • Given strong price gains and the big premium spring- and summer-month contracts hold to the cash index, some traders may be tempted to take profits out of the market.
  • Concerns with porcine epidemic diarrhea virus (PEDV) remain supportive. The disease caused Smithfield Foods to halt Friday hog slaughter at its Tar Heel, North Carolina, plant. Lower slaughter capacity would normally be a negative for hog prices, but in this case, it's reflective of exceptionally tight supplies.
  • Cash hog bids are called steady to firmer across the Midwest. Packers are working with profitable margins and competing for tightening supplies.
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