Ahead of the Open (VIP) -- October 16, 2013

October 16, 2013 03:11 AM
 

Corn futures are called to open 1 to 2 cents higher on Chinese purchases.

  • Corn futures saw light followthrough from yesterday's gains and ended the overnight session mostly around a penny higher.
  • Futures were supported into the close yesterday on rumors of Chinese purchases. Export sources confirmed to Reuters private Chinese firms have bought four to five cargoes (up to 300,000 MT) of U.S. corn this week and are shopping for more.
  • Chinese buyers say U.S. corn is more competitively priced than domestic supplies, which leads to expectations more buys are coming.
  • Gulf corn basis is steady to 1 cent higher for nearby delivery to reflect improved demand.
  • But with harvest still not yet half complete, traders recognize the bulk of hedge-related pressure is still not behind the market.

 

Soybean futures are called 5 to 10 cents higher on short-covering.

  • Soybean futures ended the overnight session 5 to 7 cents higher on short-covering.
  • Otherwise there's little fresh news for the market to digest given the lack of export news from the government.
  • Expectations that soybean harvest will or has crossed the halfway point is helping to ease pressure on the market.
  • Gulf soybean basis is unavailable this morning and there are no rumors of Chinese purchases.

 

Wheat futures are called mixed amid spreading.

  • All wheat flavors ended the overnight session mixed. Nearby SRW and HRS futures were firmer.
  • Weakness in the U.S. dollar index is supportive for wheat futures this morning, although there is some concern wheat purchases have declined and the U.S. has lost its competitive edge on the global market.
  • Upside potential in wheat is also being limited by recent rains across the Central and Southern Plains that is aiding in establishment of the winter wheat crop.
  • But concerns about another frost/freeze event in the forecast for Argentina as well as acreage concerns in Russia and Ukraine raise concerns about the global crop outlook.

 

Live cattle futures are called to open steady to firmer on short-covering.

  • Live cattle futures are expected to see a boost from ideas yesterday's losses were overdone.
  • Additional support is expected to come from improved fundamentals as this week's cattle showlist is smaller than last week and boxed beef values have firmed.
  • According to data from Urner Barry, boxed beef prices climbed last week.
  • Tighter showlists also give feedots more bargaining power after they secured $128 for cash cattle last week.
  • A firmer tone in the corn market could bring some followthrough pressure from yesterday's losses in feeder futures.

 

Lean hog futures are called mixed, with buying limited to short-covering.

  • Following yesterday's strong gains in the nearby contracts, lean hog futures are vulnerable to profit-taking.
  • According to Urner Barry, pork cutout values slipped $1.44 yesterday to tighten packer profit margins.
  • With market-ready hogs becoming more abundant, the cash hog market is expected to be steady to weaker today as packers focus on improving margins.
  • With fundamentals weakening this week, traders could opt to exit long positions, which could secure a high.
  • But December lean hog futures posted sharp gains yesterday to return to the top of the choppy consolidation range.
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