Calm Before The Storm?

March 31, 2014 01:01 AM

What Traders are Talking About:

Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 1 to 3 cents lower, soybeans are mixed amid light bull spreading and wheat futures are 3 to 6 cents lower. Hog futures will start the week under heavy pressure in reaction to last Friday's USDA Quarterly Hogs & Pigs Report. Cattle futures are expected to be pulled lower by hogs.


* Calm before the storm? Overnight trade in the grain and soy complex was relatively quiet as traders put on the finishing touches to their positions ahead of what's likely to be trend-setting data from USDA in this morning's Prospective Plantings and Quarterly Grain Stocks Reports. Most of the pre-report guesses on plantings are relatively closely bunched. But the guess ranges for March 1 grain stocks, especially for corn, are wide. It's very possible the planting intentions data could be the tone-setter today, but it's more likely grain stocks data is what will move the market if there's a sharp price reaction. Traders have routinely missed by hundreds of millions of bushels on their pre-report guesses for quarterly corn stocks.

The long and short of it: After strong runups from the winter lows, grain and soy futures have paused recently. This morning's USDA data will likely give traders encouragement to force a breakout -- up or down -- from the short-term consolidation ranges.

* Some rains for HRW wheat crop. Weekend rains favored eastern areas of the Southern Plains, while the drier western areas of the region stayed dry. There are additional rain chances across the region mid- to late-week, but most forecasters are again calling for the rains to favor eastern areas while western locations of the region are likely to stay dry. Traders will intently watch to see how the rain events forecast for Wednesday forward develop as the week progresses. Rains are far from drought-breaking at this point, but they are enough to put pressure on futures. With the HRW crop greening up, traders will pay closer attention to weather patterns for the Southern Plains.

The long and short of it: Barring any major market-moving data from USDA is this morning's report, Plains weather will be the near-term price-mover for the wheat market.

* Bearish H&P Report. USDA's Quarterly Hogs & Pigs Report showed the U.S. hog inventory down 3% from year-ago at 62.899 million head. However, that was at the very top of the pre-report guess range and 1.4 million head more than the average guess implied traders were expecting. The breeding herd at 100%, the market hog inventory at 96% and the winter pig crop at 97% also each topped the pre-report trade guesses. As a result, the data is highly negative compared to expectations and is expected to weigh heavily on hog futures. USDA also revised past data. Those revisions amounted to a 320,000-head decline in the Sept. 1, 2013, inventory; an 85,000-head increase in the Dec. 1, 2013, hog inventory; and a 229,000-head decline in the June-August 2013 pig crop.

The long and short of it: There's speculation USDA's numbers didn't catch all of the death losses caused by porcine epidemic diarrhea virus (PEDV). However, those thoughts won't be enough to offset the bearish data. The question is how far futures must fall to attract value buying.


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