What Traders are Talking About:
Overnight highlights: As of 5:45 a.m. CT, corn futures are trading around 1 cent higher, soybeans are 1 to 2 cents lower in old-crop contracts and 3 to 4 cents lower in new-crop contracts, while wheat futures are steady to 2 cents lower. Cattle and hog futures are expected to open mixed this morning.
* Brazilian soy export season underway. The first three cargoes of new-crop Brazilian soybeans left the Port of Paranagua late last week, officially starting the Brazilian shipping season. Both the harvest pace and exports will pick up this month, with an active flow of soybeans out of ports expected by the second half of the month assuming there aren't any major weather or logistic delays. It's expected many of the soybeans that will leave Brazilian ports will be en route to China. And therefore, there's risk of U.S. soybean cancellations by China.
The long and short of it: With Brazil's harvest picking up pace and the export season underway, bulls face an uphill battle in the soybean market. If last week's lows are violated, it could trigger a seasonal selloff.
* Bulls fighting seasonal pressure. The flip of the calendar to February means there's at least a little expectation that grain/soy markets will face the "February break." While that isn't always the case, it has somewhat become a self-fulfilling prophesy -- traders think it will happen, so it does. Therefore, a February break is a real risk to markets over the next four weeks.
The long and short of it: The expected "February break" is yet another hurdle bulls must face in the weeks ahead.
* U.S. cattle herd the smallest in 63 years. USDA's Cattle Inventory Report last Friday confirmed the U.S. cattle herd contracted for a seventh consecutive year, dropping to the lowest level since 1951. The Jan. 1 inventory of all cattle and calves in the U.S. at 87.730 million head is roughly 320,000 head fewer than the average pre-report guess. The U.S. cattle herd is down roughly 1.57 million head from year-ago and nearly 9.3 million head fewer than in 2007, when the contraction phase started. The calf crop also continues to contract. At 33.930 million head last year, the calf supply is nearly 350,000 head fewer than 2012.
The long and short of it: Tight supplies keep the longer-term outlook for the cattle market bullish, but there was nothing in the report that was highly market-moving. The near-term focus is more on the boxed beef and cash cattle markets.
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