Ahead of the Open (VIP) -- November 19, 2013

November 19, 2013 02:14 AM
 

Corn futures are called 1 to 2 cents higher on short-covering.

  • Corn futures ended the overnight session mostly 1 to 2 cents higher on position squaring.
  • Following yesterday's sharp losses, funds are covering short positions.
  • Traders yesterday reacted to EPA's proposal to reduce the mandate for the ethanol component of the Renewable Fuels Standard.
  • Traders also received word around midday yesterday that a cargo of U.S. corn was rejected in China due to detection of unapproved GMO material.
  • The incident is likely isolated, but China said it will increase inspections of grains.
  • This morning, Gulf corn basis is steady to stand 83 cents above December futures for immediate delivery.

 

Soybean futures are called 1 to 2 cents lower amid spread unwinding with corn.

  • Soybean futures ended the overnight session 1 to 2 cents lower through the August 2014 contract, with far deferreds favoring a firmer tone.
  • Futures were pressured overnight by spread unwinding with corn, although pressure was limited by weakness in the U.S. dollar index.
  • Selling should be limited by continued strong demand for U.S. soybeans, although expectations for a record South American crop will limit buying.
  • The tug of war between bullish and bearish fundamentals factors will likely keep soybean futures within the boundaries of the recent highly choppy consolidation range.
  • Meanwhile, news that China has purchased 240,000 MT of U.S. soybeans for 2014-15 to support the market on the open.
  • Gulf soybean basis is steady to 1 cent higher through January to signal supplies and demand are in balance.

 

Wheat futures are called 2 to 4 cents higher on a dip in crop condition ratings.

  • All wheat flavors ended the overnight session 2 to 4 cents higher.
  • Futures enjoyed spillover from short-covering in the corn market, as well as an unexpected dip in the condition of the winter wheat crop.
  • Our weighted Crop Condition Index (0 to 500 point scale) showed the HRW crop slipped 3 points to 366, while the SRW crop held steady at 380.
  • Additional support is coming from weakness in the U.S. dollar index.
  • Traders are awaiting results of an Egyptian wheat tender. The U.S. has not garnered any of Egypt's recent business, signaling supplies here are not competitive on the global market.

 

Live cattle futures are called steady to weaker on followthrough pressure.

  • Live cattle futures are at risk of seeing followthrough pressure after futures slipped sharply in late trade.
  • But short-covering is a possibility given tight market-ready supplies.
  • Traders aren't impressed with the start of the boxed beef market, as Choice values were up $1.27, but Select dropped 60 cents and only 115 loads changed hands.
  • Following yesterday's sharp decline, December live cattle are trading in line with last week's $132 cash cattle trade.
  • This week's cattle showlist is up slightly in Nebraska and Texas, but smaller in Colorado and Kansas for little net change from week-ago.
  • A firmer tone in the corn market will limit buying in the feeder cattle pit to short-covering.

 

Lean hog futures are called steady to weaker on followthrough pressure.

  • Lean hog futures are expected to see spillover from live cattle and followthrough from yesterday's losses.
  • Additional pressure is expected from the technical breakdown of the market, as important support levels have been violated to give bears the near-term advantage.
  • Pressure could be limited by yesterday's 89-cent gain in pork cutout values on solid movement of 337.69 loads.
  • While profitable packer margins keep demand for cash supplies strong, packers have no reason to bid up for animals as supplies are building.
  • As a result, the cash market is expected to be steady to weaker again today.
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