Ahead of the Open (VIP) -- November 1, 2013

November 1, 2013 03:16 AM
 

Corn futures are called to 1 to 2 cents lower on dollar strength.

  • Corn futures ended the overnight session mostly 1 to 2 cents lower on followthrough from yesterday's losses.
  • Strength in the U.S. dollar index is also weighing on the market.
  • The flip of the calendar brought followthrough pressure as bears clearly hold the advantage after future posted losses in October.
  • Pressure on the corn market comes from expectations of a large crop as reports of "better-than-expected" yields continue to flood the market.
  • Meanwhile, the U.S. ag attaché in Argentina has lowered its forecast for the 2013-14 corn crop to 24 MMT, which is 2 MMT below USDA's current estimate.
  • But price-friendly news is doing little more than limiting pressure, as traders also discounted yesterday's impressive export sales tally.

 

Soybean futures are called 2 to 4 cents lower on followthrough pressure.

  • Soybean futures ended the overnight session 2 to 4 cents lower on followthrough from yesterday's losses.
  • Strength in the U.S. dollar index is adding to weakness in the market, although yesterday's weekly export sales data reminded the market of China's large appetite for U.S. soybeans.
  • January soybeans are pivoting around support at the October low. A weekly close below that level would be a bearish clue and open the door to followthrough weakness.
  • Traders are turning more attention to expectations for a record crop in South America amid a return to more favorable weather.
  • Also this morning, USDA announced export sales of 115,000 MT of soybeans to China and a 33,000-MT soyoil sale to an unknown destination -- all for 2013-14.

 

SRW and HRS are called 2 to 3 cents lower, with HRW down 4 to 7 cents.

  • SRW and HRS traded in line with the corn market overnight, posting slight losses. HRW futures saw steeper losses of 7 to 8 cents.
  • Strength in the U.S. dollar index and a rise in corn export business during October raises concerns that U.S. wheat prices are not as competitive as previously.
  • This is causing traders to unwind long wheat/short corn spreads.
  • Meanwhile, traders say global crop concerns are factored into prices and they are taking some weather premium out of the market.
  • But the U.S. ag attaché in Argentina has lowed its forecast for the 2013-14 wheat crop to 10.5 MMT, which is 1.5 MMT below USDA's current estimate.

 

Live cattle futures are expected to favor a firmer tone in mixed trade.

  • Live cattle futures are expected to see a boost this morning from yesterday's Cattle on Feed (COF) Report, which was viewed as slightly friendly.
  • The report showed Placements slightly above expectations at 101% of year-ago levels, but Marketings well above expectations at 106% to bring On Feed slightly below expectations at 92% of year-ago.
  • Meanwhile, the Cold Storage Report maintains traders' concerns about demand, as it showed frozen beef stocks at the end of September up 3% from the previous month. Traders expected the report to show a slight decline in stocks.
  • With the COF Report being offset by a bearish stocks report, how the cash market performs today will be key.
  • Expectations continue that cash trade will be at least steady with last week's record prices, with some hoping for higher bids given rising beef prices.

 

Lean hog futures are called to open mixed amid pre-weekend position squaring.

  • Lean hog futures are called to open mixed as traders focus on evening positions ahead of the weekend.
  • Concerns about the cash market will limit buying, as well as signs futures have posted a high.
  • The cash market is called steady to weaker as packers are working on securing next week's needs.
  • Meanwhile, yesterday's Cold Storage Report showed frozen pork stocks at the end of September 10% tighter than year-ago, but up 3% from the previous month. The report came in slightly above the average pre-report trade guess.
  • Following yesterday's sharp losses, December lean hog futures are trading in line with the cash market.
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