Ahead of the Open (VIP) -- May 20, 2013

May 20, 2013 03:13 AM
 

Corn futures are called to open 1 to 2 cents lower in all but the front-month contract amid bull spreading.

  • Front-month July corn futures ended the overnight session firmer amid tight old-crop supplies, while the rest of the market ended 1 to 2 cents lower on followthrough from last week's losses.
  • Gulf corn basis is 2 cents firmer this morning for immediate delivery to stand 92 cents above July futures, which suggests some fresh demand.
  • Due to favorable weather last week, traders expect this afternoon's progress report from USDA to show at least 60% of the U.S. corn crop has been planted.
  • But heavy storms moved across the western Corn Belt overnight and more rain is in the forecast. As a result, it will take several days before producers can get back into fields to wrap up planting on those "late" acres.
  • The NWS forecast for May 25-29 calls for below-normal precip across the bulk of the Corn Belt, although above-normal precip is expected across the upper Midwest.
  • Also this morning, USDA announced a 120,000-MT corn sale to an unknown destination for 2013-14.

 

Soybean futures are called 2 to 6 cents lower in all but the front-month contract amid bull spreading.

  • Tight old-crop supplies supported July soybean futures overnight, but the rest of the market ended the overnight session 2 to 7 cents lower on profit-taking following last week's gains.
  • Concerns about port strikes in Brazil are limiting pressure on nearby futures, as it could shift some demand to U.S. ports.
  • However, Gulf soybean basis is 20 cents lower for immediate delivery this morning to stand $1.30 over July futures.
  • Traders are opting to take some profits out of new-crop futures this morning on expectations producers made strong headway with soybean plantings last week.
  • Rains moving across the western Corn Belt overnight are recharching soil moisture levels.

 

Wheat futures are called to open 1 to 2 cents lower on spillover from corn.

  • Chicago and Kansas City futures ended the overnight session mostly 1 to 2 cents lower, while Minneapolis was narrowly mixed.
  • Lacking fresh news of its own, wheat futures are vulnerable to spillover from neighboring pits.
  • Pressure on the U.S. dollar index this morning is limiting selling, but crude oil and gold are also weaker this morning.
  • Severe weather across the Plains overnight provided more needed moisture for the crop, although yield losses are already severe across the region.

 

Live cattle futures are called to open weaker in reaction to Friday's bearish Cattle on Feed Report.

  • Live cattle futures are called to open lower due to Friday's Cattle on Feed Report that showed all categories on the bearish side of expectations.
  • The report is especially bearish for deferred futures as cattle placed in feedlots came in three percentage points above expectations to suggest marketings will be heavier later this summer and into the fall than earlier expected.
  • But nearby futures ended last week at around a $5 discount to the cash market, suggesting the bearish report is already factored into prices.
  • Traders will be keeping a close eye on the boxed beef market after Choice values soared to new highs last week, which softened movement.

 

Lean hog futures are called to open steady to firmer on short-covering and strength in the pork market.

  • Lean hog futures are expected to benefit from short-covering after nearby futures softened into Friday's close on news of porcine epidemic diarrhea virus (PEDV) in the Iowa hog herd.
  • While traders will monitor the PEDV situation for signs of an outbreak, a firmer cash hog market is expected to support lean hog futures this morning.
  • Pork cutout values firmed 48 cents on Friday to keep packers' profit margins in the black and market-ready supplies are seen tighter this week. Many packers are in need of additional supplies to start the week.
  • June lean hog futures are trading at around a $1 discount to the cash index, which raises the potential for short-covering this morning.
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