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

November 20, 2013 02:19 AM
 

Corn futures are called 1 to 2 cents weaker as bearish attitudes persist.

  • Corn futures ended the overnight session 1 to 2 cents lower following yesterday's short-covering rally.
  • There's little fresh news for the market to digest this morning and the path of least resistance remains with market bears.
  • A reminder of rebuilding demand comes from news that Japan's use of corn in feed rations held steady in September from the previous month after declining for several months. Traders are watching this figure after the country has increased its corn-for-feed coverage recently.
  • Also providing a reminder that demand is strengthening is a 2-cent improvement in Gulf corn basis this morning for winter delivery.

 

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

  • Soybean futures favored a firmer tone in overnight trade on ideas yesterday's losses were overdone. Nearby futures posted marginal gains overnight.
  • But the lack of a convincing rally overnight signals there is more near-term downside risk in this market as traders turn their focus to expectations for a record South American crop.
  • Unconfirmed rumors that China was canceling some U.S. soybean purchases pressured the market yesterday.
  • This morning, Gulf soybean basis is 2 to 3 cents weaker for delivery the remainder of 2013, which raises concerns that new-crop supplies are outpacing demand.
  • January beans are trading near the middle of the two-month consolidation range.

 

SRW and HRS futures are called a penny lower, with HRW expected to be mixed.

  • SRW and HRS futures ended the overnight session marginally to 1 cent lower, with HRW 1 3/4 cents higher to 1/4 cent lower.
  • Weakness in the corn market weighed on SRW futures.
  • But a weaker tone in the U.S. dollar index overnight helped to limit pressure on all wheat flavors.
  • Pressure was also limited by news that late-season rains are raising concerns about the quality of the Western Australia wheat crop as well as their impact on yields. Quality concerns would improve demand for U.S. and Canadian wheat.
  • USDA announced a 110,000 MT SRW wheat sale to Egypt for 2013-14.
  • Meanwhile, Gulf SRW wheat basis is steady to 5 cents weaker for delivery the remainder of 2013, reflecting a softening of demand. But basis remains lofty at 90 cents over December futures for immediate delivery.

 

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

  • Live cattle futures are due for a corrective bounce as contracts near oversold territory, but are expected to see followthrough pressure this morning.
  • Pressure on the product market is lowering cash expectations even though supplies are tight.
  • Choice beef values slipped $1.54 and Select declined $1.81 yesterday on improved movement of 190 loads.
  • With packer profit margins already in the red, they aren't expected to budge this week and raise cash bids.
  • Today's price action in December live cattle is critical, as the contract was stopped by uptrending support drawn off May and September lows yesterday.

 

Lean hog futures are called steady to weaker on softening pork values.

  • Lean hog futures ended yesterday mixed, but are called lower this morning due to weakness in the pork cutout market.
  • Pork values slipped $1.84 yesterday, but packers moved 391.42 loads of product.
  • While packers' profit margins are well in the black, building market-ready supplies and weakness in the pork market will maintain a negative bias in the cash market this week.
  • December lean hog futures are trading at around a $2 premium to the cash index, which increases the risk of a selloff.
  • December lean hog futures posted a weekly low yesterday. Violation of support at the August high of $84.72 1/2 would open significant near-term downside risk.
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