Choppy Trade Continues

January 14, 2009 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Grain markets still dealing with Monday's reports... Monday's USDA reports have put a damper on bullish optimism. Following sharp losses in the corn market, all the corn market to get yesterday was a slight short-covering bounce. Sharp declines in the crude oil market this week have also limited upside potential to short-covering. Crude oil was firmer overnight amid short-covering, but there too, attitudes are bearish amid the economic slowdown.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 1 to 2 cents lower. Futures were weaker overnight following yesterday's slight gains to maintain a choppy tone. Futures finished around 4 cents higher, which was in the middle of yesterday's range. Futures struggled to find buyer interest through much of the morning, but benefited from light short-covering in late trade. Still, bears have momentum on their side as today's modest gains were no more than a correction to sharp losses to start the week.

Soybeans: 1 to 6 cents lower. Futures were weaker overnight to maintain this week's choppy tone. Futures saw a choppy day of trade. January beans finished around 8 cents higher, with March steady. The rest of the pit closed marginally to 3 cents lower. Outside markets limited upside potential in the soy complex and contributed to pressure in morning trade.

Wheat: 2 to 4 cents lower. Futures were weaker overnight on spillover from neighboring pits. Wheat futures saw a choppy day of trade, but didn't stray too far from unchanged in either direction. Chicago wheat closed 3 to 4 cents higher. March Chicago wheat spent the day pivoting around the 38% retracement level of the rally from the December low to the January high. Futures respected support at the halfway point of the range, which lies at $5.55.

Cash cattle expectations: $1 to $2 higher. So far, no notable cash cattle activity has taken place in the Plains, although barring a sharp collapse in cattle futures, traders and cash sources generally expect cash trade in the $85 to $86 range. Weather could impact cattle trade as extremely bitter cold temps have invaded the Midwest and parts of the Plains.

Futures call: Mixed. Futures are expected to see a choppy start as traders wait on cash trade to begin. February live cattle poked below Monday's low at $82.75, but failed to find fresh seller interest at that level. Contract-low support lies at $80.60. Key near-term resistance is at the 40-day Moving Average around $85.50. A push above that level could spark fresh chart-based buying.

Cash hog expectations: Steady to weaker. Most packers have this week's slaughter needs covered as some have reduced kill runs amid slumping margins. The combination of kill needs being covered, slowed hog movement due to bitter cold temps across the Midwest and a $1.64 drop in the average pork cutout value Wednesday could cause packers to shift focus and work on trying to improve slumping margins. As a result, cash hog bids are seen no better than steady at most locations today.

Futures call: Mixed. Futures finished near session highs in all but the February contract, which closed mid-range. Futures are called to open mixed as price action could be choppy amid spreading. The cash index has risen sharply so far this month, to help trim the premium futures hold, but futures are also responding by moving lower as feel the premium is still too much. February hogs hold just a $3 premium to the index, which is much more in line.

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