Ahead of the Open (VIP) -- March 27, 2014

March 27, 2014 03:17 AM
 

Corn futures are called to open 1 to 3 cents higher based on strong weekly sales.

  • Corn futures were choppy overnight, but firmed in late trade in reaction to the weekly export sales data.
  • Weakness in the wheat market overnight provided spillover pressure, but indications that corn is a value on the global market could spark fresh buying this morning.
  • Weekly corn sales topped 1.4 MMT for 2013-14 and 28,400 MT were reported for 2014-15. The tally is well above expectations and exports topped 1.2 MMT.
  • Egypt was the top buyer of old-crop corn, which is a clear sign U.S. prices are competitive on the global market.
  • But traders so far have been hesitant to to push futures above the top of the month-long consolidation range due to tighter-than-expected hog numbers and tight cattle supplies.
  • Traders are also waiting on Monday's key USDA reports, as acreage and stocks data has sparked trending moves in previous years.
  • Traders look for 2014 corn acreage around 92.748 million acres and for March 1 corn stocks around 7.1 billion bushels.

 

Soybean futures are called 1 to 5 cents higher amid a lack of significant sales cancellations.

  • Soybean futures favored a firmer tone in choppy overnight trade and ended the session 1 to 3 cents higher.
  • This morning's Weekly Export Sales Report is positive in that it lacked significant sales cancellations. Weekly sales of 11,900 MT for 2013-14 are relatively low, although exports of 720,100 MT were strong considering the export window should be coming to a close.
  • Sales of 534,900 MT were reported for 2014-15 to bring the combined sales tally above expectations.
  • Export sales cancellations were the following: Unknown destinations (170,000 MT), Indonesia (39,800 MT), Venezuela (25,000 MT), Thailand (6,500 MT) and Vietnam (1,500 MT).
  • Traders are hesitant to aggressively add long positions ahead of next week's key USDA reports, as they expect 2014 soybean acreage around 4.5 million above year-ago at 80.075 million.
  • March 1 soybean stocks, however, are expected at a tight 989 million bushels.

 

All wheat flavors are called to open 3 to 6 cents lower on rains in the Plains.

  • All wheat flavors ended the overnight session mostly 3 to 4 cents lower, which was near session lows.
  • Rains fell on areas of the Plains yesterday, but were not drought busters. Forecasters say there's more rain in the near-term forecast, which is enough reason for traders to take some profits, causing followthrough pressure overnight.
  • Strength in the U.S. dollar index added to the negative tone overnight.
  • Traders had a muted initial reaction to this morning's weekly export sales data, although sales of 400,500 MT for 2013-14 and 327,500 MT for 2014-15 topped expectations.
  • Exports of 530,400 MT were up 21% from week-ago.
  • Top buyers of old-crop wheat were Japan, the Philippines, Nigeria and Egypt. Mexico was the lead buyer of new-crop wheat.
  • Traders expect next week's winter wheat acreage to come in around 42.157 million, down from 43.09 million in 2013. Spring wheat acreage is expected at 12.27 million, up from 11.60 million last year.
  • March 1 wheat stocks are expected to be tighter than year-ago at 1.042 billion bushels.

 

Live cattle futures are called to open slightly lower amid profit-taking.

  • Live cattle futures are expected to open under light pressure following yesterday's strong gains in the nearby contracts.
  • Some spreading is possible, with deferred futures being lifted by prospects for tightening supplies as those contacts hold a discount to nearbys.
  • Pressure on April futures should be limited as the contract ended yesterday at around a $6 discount to this week's $152 cash cattle trade on the Southern Plains.
  • Traders are hesitant to bring futures in line with the cash market as they don't expect packer demand for supplies to remain as strong as it currently is as margins are at risk of eroding as beef prices soften.
  • Choice beef values firmed 51 cents yesterday and Select softened $1.14 to widen the premium Choice holds to Select to $8.45. Movement was decent at 149 loads yesterday.
  • Increased price volatility at high prices is a technical topping signal, which makes traders leery of increasing their long exposure to the market.
  • March feeder futures are at risk of light profit-taking heading into the last trading days as it holds a slight premium to the cash index.

 

Lean hog futures are called to open slightly higher after yesterday's recovery.

  • Lean hog futures are expected to see light followthrough from yesterday's gains after futures posted a strong recovery from a gap-lower start yesterday.
  • Today's price action could be technically significant. A high-range close could signal a test of the high is ahead, while price weakness could be confirmation of a high being in place.
  • Another choppy day of trade could be ahead as traders work to even positions ahead of Friday's key Hogs & Pigs Report.
  • Traders look for the report to show All Hogs & Pigs at 94.5%, Kept for Breeding at 99.6% and Kept for Marketing at 94.0% of year-ago levels.
  • Based on the pre-report guesses, it's clear traders expect the report to reflect the PEDV outbreak, although the most significant read on the report could come via revisions from December data.
  • The cash hog market is called steady to higher based on tight market-ready supplies and somewhat improved margins.
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