Cattle Inventory Report Paints Tighter Beef Supply Picture for 2012

January 30, 2012 12:44 AM

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Overnight highlights. Following are highlights of overnight trade and opening calls:

Corn: 4 to 6 cents higher. Futures were weaker overnight due to rains in the forecast for Argentina this week and due to negative outside markets. The U.S. dollar index is stronger this morning amid debt concerns in the euro-zone, as concerns about Greece defaulting on its debt have heightened. The forecast calls for a near daily chance of rain in Argentina this week, but crop watchers there say it's too late to improve corn yields there. But given the recent boost in demand, traders will continue to keep an eye on basis.

Soybeans: 9 to 13 cents lower. Futures were pressured by broad-based commodity selling overnight amid dollar strength. The U.S. dollar strengthened against the euro overnight as investors' concerns are heightened leaders in the zone are not united on becoming more aggressive on controlling its debt. Forecasts for rains this week in Argentina and southern Brazil are adding to profit-taking, although too much rain in Mato Grosso, Brazil, have increased concerned about crop quality there and have delayed the early harvest -- considerably.

Wheat: 5 to 8 cents lower. Futures remain in a follower's role and there was no fresh demand news to report over the weekend. Strength in the U.S. dollar index will weigh on wheat futures this morning. A recent increase in wheat demand has helped to lift wheat futures off its lows, but wheat needs a constant dose of good demand news in order to keep investors interested in extending long positions.

Live cattle: Mixed. Futures are expected to be higher this morning and could be sharply higher in reaction to Friday's key Cattle Inventory Report. The report showed All Cattle & Calves in line with pre-report expectations at 98% of year-ago to reflect tighter supplies this year. But the big surprise is that beef replacement heifers came in at 101% of year-ago levels to reflect herd rebuilding. With producers beginning to hold back heifers, it will tighten slaughter supplies even more this year and that paints an even more bullish price picture this year. Meanwhile, last week's cash cattle trade took place at $124 in the Southern Plains, down $2 from the previous week, which could limit buying enthusiasm.

Lean Hogs: Steady to firmer. Futures are expected to benefit from spillover from the neighboring cattle pit, but gains could be difficult to sustain unless the pork cutout market signals its working on a near-term low. Packers saw profit margins slip deeper into the red last week, which cash sources believe will lower demand for hogs early this week. Cash bids are seen steady to weaker today.


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