Ahead of the Open (VIP) -- May 14, 2013

May 14, 2013 03:12 AM
 

Corn futures are called narrowly mixed this morning.

  • Corn futures finished narrowly mixed overnight. There was limited followthrough buying after Monday's gains, but selling interest was also limited.
  • May corn futures expire at noon CT today. With open interest of 668 contracts as of yesterday's close, there could be some fireworks today, especially since there once again were no deliveries against the May contract.
  • Tight supplies and a strong cash market will continue to support old-crop futures. And July corn will have an upside target once May futures leave the board.
  • The record-slow corn planting pace at just 28% complete as of Sunday should limit selling interest in new-crop futures, but planters are finally actively rolling across the Corn Belt, so traders aren't showing great concern with the slow planting pace.

 

Soybean futures are expected to open with a mostly firmer tone.

  • Soybean futures favored the upside overnight, but gains were trimmed late, with the July and August contracts finishing the overnight session slightly lower.
  • May soybean futures expire at noon CT today and there could be a short squeeze as open interest still stood at 1,357 contracts as of Monday's close. Plus, there were no deliveries against the May contract overnight, as expected.
  • Soybean planting was only 6% complete as of Sunday, the slowest pace since 1984. With producers focused on getting corn seeded, the soybean planting pace won't pick up much this week. But there is more concern of an acreage shift from corn to beans given the historically slow corn planting pace.

 

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

  • Wheat futures were light and choppy overnight, with contracts at all three exchanges holding close to yesterday's closing levels.
  • The lack of followthrough buying interest overnight signals the upside remains limited to corrective buying and that will have to originate in the corn market.
  • Winter wheat conditions, as a whole, showed little change. When USDA's ratings are plugged into the weighted Pro Farmer Crop Condition Index, the HRW crop ticked 1 point higher -- the first uptick since the growing season began last fall. That's giving traders some hope the crop is stabilizing. Still, the crop is "fair" to "poor."
  • The U.S. dollar index is mildly firmer this morning. While not strong enough to put pressure on wheat futures, it is helping to limit buying interest.

 

Live cattle futures are seen opening with a mixed tone. Feeder cattle futures are also expected to be choppy this morning.

  • Cattle traders remain hesitant to actively buy futures, but the big discount summer-month contracts hold to the cash market may encourage light short-covering.
  • Traders are hopeful cash cattle prices will come in steady to firmer compared with last week's $126 to $128 cash cattle trade in the Plains as packer margins are strong.
  • Boxed beef prices continue to hold strong, with Choice values up 15 cents Monday and just 36 cents below the all-time high posted last week. But traders still sense the product market is working on a short-term top.
  • Feeder cattle traders will keep a close watch on the corn market. If corn builds on yesterday's strong gains, buying interest in feeder cattle will be limited.

 

Lean hog futures are expected to open with a mixed tone this morning.

  • Price action is expected to be light and choppy as traders await the noon CT expiration of May lean hog futures today. The contract is at a slight premium to the cash index, while summer-month futures are trading at a slight discount to the cash market.
  • Cash hog bids are expected to be steady at most Midwest locations. While some plants have cut back on kill hours, cash sources signal there's still some demand for late-week needs. With producers actively in fields, hog movement is expected to be light. That may be enough to firm up bids in some areas.
  • The pork cutout value was 60 cents higher Monday, but movement slowed to just 255.6 loads, suggesting the bulk of Memorial Day buying is complete.
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