Ahead of the Open (VIP) -- March 31, 2014

March 31, 2014 03:18 AM
 

Corn futures are called to open 2 to 5 cents lower amid pre-report position squaring.

  • Corn futures ended the overnight session around 3 to 5 cents lower as traders moved to the sidelines ahead of this morning's key USDA reports.
  • According to pre-report expectations, traders look for USDA's March 1 corn acreage to be up from its estimate released at the Outlook Forum, with the average guess at 92.748 million acres. But that represents around a 2.6-million-acre reduction from 2013.
  • The Grain Stocks Report has been the major market-mover in the past. Traders look for stocks of around 7.099 billion bu., up from 5.4 billion bu. a year ago.
  • Traders will also be focused on end-of-the-month and quarter position squaring. This morning's reports are known for setting near-term trends.

 

Soybean futures are called 1 to 3 cents lower in lackluster trade.

  • Futures were choppy overnight and ended the session with losses of 1 to 4 cents.
  • Focus in the market is on evening positions ahead of this morning's key USDA reports.
  • Traders look for March 1 acreage of 81.075 million, which would be up from USDA's Outlook Forum estimate, and up from 76.533 million in 2013.
  • Traders expect the stocks report to reveal a tightening supply situation and the likelihood that USDA will lower its 2013-14 soybean carryover peg in the April S&D Report. The average trade guess is 989 million bu., below the year-ago tally of 998 million bushels.
  • Price action is likely to be choppy this morning and will turn increasingly volatile around report time.

 

All wheat flavors are called to open 4 to 6 cents lower on profit-taking ahead of USDA's reports.

  • All wheat flavors ended the overnight session 4 to 6 cents lower on profit-taking and weekend rains in the Plains.
  • Traders will be focused this morning on evening positions ahead of the 11:00 a.m. CT Prospective Plantings and Grain Stocks Reports.
  • According to pre-report expectations, traders look for spring wheat acreage of around 12.27 million, compared to 11.596 million in 2013. All wheat acreage of around 56.277 million is expected, which compares to 56.156 million in 2013.
  • Traders expect the Grain Stocks Report to reveal March 1 wheat stocks of around 1.042 billion bu., down from 1.235 billion bu. a year ago.
  • Wheat futures were also pressured overnight after weekend rains provided some relief to eastern areas of the Southern Plains. Additional rain chances are in the near-term forecast.

 

Live cattle futures are called to open weaker on concerns about the beef market.

  • Live cattle futures are vulnerable to spillover from lean hog futures, as well as weakness from the beef market.
  • Choice beef values plunged $4.79 on Friday and Select dropped $3.87, but movement improved to 203 loads.
  • Cash sources say they expect this week's showlist to be fairly well aligned with last week, but with packers' margins tightening amid weakness in the beef market, demand for cash supplies is expected to be lighter.
  • Traders believe last week's $152 to $154 cash trade represents a near-term high.
  • As a result, traders are comfortable with the $5.50 discount April cattle hold to the bottom end of last week's cash trade.
  • Weakness in the corn market overnight should help to limit pressure on feeder futures this morning.
  • Traders will also be focused on end-of-the-month and quarter's end position squaring.

 

Lean hog futures are called to open lower on a disappointing H&P Report.

  • Lean hog futures are vulnerable to a selloff this morning in reaction to Friday's Quarterly Hogs & Pigs Report.
  • While the report reflected impacts of the porcine epidemic diarrhea virus (PEDV) on the pig crop, actual figures were bearish compared to expectations.
  • For example, All Hogs & Pigs came in at 97% of year-ago, 2.5 percentage points higher than the average trade guess. The weight breakdowns suggest that slaughter will run 3% to 5% lower than year-ago through spring, and traders have a steeper drop priced into the market.
  • In addition, the report signaled producers are doing all they can to hold onto breeding stocks, as Kept for Breeding came in even with year-ago levels. This reflects expansion plans.
  • Pork cutout values firmed 37 cents on Friday amid light movement of 259.93. With packers working with tight margins, the cash market is expected to be mostly steady this morning.
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