Ahead of the Open (VIP) -- May 13, 2013

May 13, 2013 03:13 AM
 

Corn futures are called 3 to 5 cents higher on the open this morning.

  • Corn futures finished 3 to 5 cents higher in all but the May contract, which posted gains of 7 cents overnight.
  • May corn futures expire Tuesday and given tight old-crop supplies, there could be some fireworks in that contract ahead of expiration.
  • Based on overnight trade, USDA's bearish new-crop supply and demand numbers appear to be factored into prices. But the upside is likely limited to corrective buying for now.
  • Last week was the best planting week of the spring so far, but planting progress will still be far behind the normal pace in this afternoon's update from USDA. This week's forecast calls for three days of warm, dry weather, followed by a brief rain event and then more warm and dry conditions. As a result, traders are expecting a pickup in planting activity.
  • State-run China National Grain and Oils Information Center pegs China's corn crop at a record 214 MMT, but it sees imports up 85.2% to 5 MMT in 2013-14.

 

Soybean futures are expected to open with a mixed tone amid bull spreading.

  • Nearby soybean futures were firmer overnight, while deferred futures were weaker. Similar price action is expected on the open this morning.
  • Tight supplies continue to support old-crop futures. With the May contract expiring Tuesday, volatile price action is possible.
  • Traders are still digesting USDA's record soybean crop forecast and the bigger-than-expected jump in 2013-14 carryover. Bears remain solidly in control, with the established downtrend in November soybean futures firmly intact.


Wheat futures are expected to open with a mixed to mostly firmer tone this morning.

  • Wheat futures favored the downside early in the overnight session, but firmed late to finish with an upside bias. That mildly firmer tone should carry over to this morning.
  • The bulk of any support in the wheat market will come from short-covering as the market has been under pressure. Without a fundamental catalyst, the upside is limited.
  • HRW crop woes are lingering, but price action signals traders feel the crop still has time for a partial recovery. This week's forecast doesn't offer much hope, with above-normal temps and limited precip in the outlook.

 

Live and feeder cattle futures are seen opening with a mixed tone.

  • Cattle traders will closely monitor boxed beef price action this week after Choice values surged to a record high last week. With Memorial Day buying winding down, traders feel the product market is likely putting in a short-term top.
  • Given expectations for a top in the product market, traders are likely to remain comfortable with the big discount futures hold to the cash index.
  • Demand concerns continue to hang over the market, but some of that pressure may start to ease as the U.S. is reportedly working on a protocol with Russia to ensure shipments of U.S. beef are ractopamine-free.
  • Feeder cattle are due for a corrective bounce, but mild strength in corn and the big premium futures hold to the cash index is likely to limit buying interest, especially if buying in live cattle is light.

 

Lean hog futures are expected to start the week with a mixed tone.

  • May lean hog futures expire Tuesday, which should lead to light and choppy trade today as the contract is trading just above the cash index.
  • Deferred hog futures are also expected to be choppy today, through there is some room to the upside with summer-month contracts trading at a discount to the cash market.
  • Cash hog bids are expected to be steady at most locations today. While market-ready supplies are tight, packers are working with highly negative cutting margins.
  • News USDA is working on a protocol to ensure Russia U.S. shipments are ractopamine-free could give the market a boost.
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