Ahead of the Open (VIP) -- September 26, 2013

September 26, 2013 03:15 AM

Corn futures are called to open 1 to 2 cents lower to maintain this week's choppy trading pattern.

  • Following yesterday's slight gains, corn futures ended the overnight session mostly 2 cents lower to keep this week's choppy trading range intact.
  • Traders are beginning to more aggressively even positions ahead of Monday's key Quarterly Grain Stocks Report, as it sets 2012-13 carryover. Traders expect the report to show end-of-marketing-year corn stocks at 688 million bushels.
  • Pressure on corn should be limited by ongoing indications that export demand is in the process of rebuilding. Weekly corn sales of 640,100 MT for 2013-14 came in above traders' expectations.
  • A Chinese trade executive said he expects the country's self-sufficiency corn rate could fall to 93% by 2018 and 90% by 2020 from the current 95% level. This indicates growing export potential for U.S. corn.
  • Futures will have a difficult time mustering up more than short-covering as harvest ramps up. Country basis levels continue to soften.


Soybean futures are called to open 4 to 6 cents lower on profit-taking.

  • Soybean futures ended the overnight session 4 to 6 cents lower on profit-taking after futures posted a strong close yesterday.
  • Futures are being pressured by softening basis levels across the country, although traders recognize export demand remains strong.
  • This morning's weekly export sales data is a reminder of China's strong appetite for U.S. soybeans. Weekly sales of nearly 2.817 MMT were mostly to China and came in above expectations. This was confirmation of previously announced purchase agreements.
  • Meanwhile, China sold 250,022 MT of soybeans out of the 501,006 MT it put up for auction this week. This is the smallest sale in about a month even though prices have declined.


Wheat futures are expected to see mild followthrough buying after yesterday's gains.

  • SRW wheat ended the overnight session 2 cents higher in the nearby contracts, with deferreds seeing light pressure. Meanwhile, HRW and HRS futures ended mostly 2 to 3 cents higher.
  • The ability of wheat futures to rally in the face of profit-taking in the corn and soybean markets signals a change in attitude toward the wheat market.
  • Traders are waking up to recent demand improvements, as it signals U.S. wheat is once again competitive on the global market.
  • This morning's weekly export sales data shows sales of 620,200 MT coming within traders' expectations, with exports of more than 1 MMT.
  • Meanwhile, traders are tracking demand reports after frost hit Argentina's wheat belt earlier this week. Recent media reports signal demand may have been overstated.


Live cattle futures are called to open mixed as traders wait on cash trade to develop.

  • Live cattle futures are expected to see a choppy start as traders even positions and wait on clearer direction from the cash market.
  • Based on the $3-plus premium October live cattle hold to last week's $124 cash cattle trade, traders fully expect packers to be forced to raise bids.
  • But so far packers have been reluctant to bid up for cattle, which signals trade will be delayed until tomorrow.
  • Meanwhile, the beef market has softened as the week progressed, although movement improved to 235 loads yesterday. Choice beef values slipped 18 cents yesterday and Select rose 42 cents.
  • Choice beef values hold more than a $16 premium to Select, which reflects tight supplies of higher-quality cuts.
  • Slight weakness in the corn market is supportive for the feeder cattle market this morning.


Lean hog futures are called to open steady to weaker on profit-taking.

  • Nearby lean hog futures are vulnerable to profit-taking after back-to-back days of sharp price gains. The October contract is overbought according to the 9-day relative strength index and due for a time or price correction.
  • But price pressure will be limited to profit-taking as nearbys remain at a discount to the cash index and the pork market continues to strengthen.
  • Pork cutout values surged $1.40 yesterday and more than 466 loads of cuts changed hands to represent strong demand.
  • Packers have seen profit margins improve this week. But due to tighter market-ready supplies, demand for cash hogs is lighter this week as packers have scaled back kill requirements.
  • Traders are also focused on evening positions ahead of tomorrow afternoon's Hogs & Pigs Report which is expected to show supplies have tightened for the near-term, but that expansion plans are in place.
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