Corn Extends Losses

January 13, 2009 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Corn continues lower... Corn futures posted double-digit losses yesterday following Monday's limit lower decline. Sharp pressure has come as traders digest Monday's USDA reports, which surprised the market with some bearish numbers. Traders feel the higher-than-expected carryover figure has reduced the need to bid for acres, although another drop in corn acres would dramatically tighten carryover for the 2009-10 marketing year.

Outside markets also had an impact on the corn market. Traders fear strength in the dollar would reduce corn's competitiveness on the global market. The turnaround in the crude oil market didn't help to support the corn market Tuesday, as traders were focused on bearish signals. Traders are also showing little concern over drought conditions during kernel fill in Argentina, as USDA sharply raised global carryover in Monday's report.

Corn is entering oversold territory and is due for a corrective bounce. If soybeans continue to recover, it should be supportive for the corn market. Futures were firmer overnight on short-covering. Key will be if traders view it as a selling opportunity or if they feel bearish news is factored into the market.

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

Corn: 4 to 5 cents higher. Futures were firmer overnight amid short-covering. Futures extended losses into the close yesterday to finish 17 to 18 cents lower. Traders feel the higher-than-expected carryover figure has reduced the need to bid for acres, although another drop in corn acres would dramatically tighten carryover for the 2009-10 marketing year. Outside markets also had an impact on the corn market. Traders fear strength in the dollar would reduce corn's competitiveness on the global market.

Soybeans: 15 to 17 cents higher. Futures were mostly around 15 to 16 cents higher overnight on spillover from yesterday's gains. Futures gave back a lot of the early gains in late trade yesterday, but still finished firmer on ideas Monday's losses were overdone. Traders' focus returned to South American weather conditions, which remain troublesome, especially in Argentina. But a late extension of losses in the corn market pulled soybeans well off session highs into the close.

Wheat: 4 to 5 cents higher. Futures were firmer overnight on spillover from neighboring pits and yesterday's gains. Futures trimmed gains into the close, with Chicago closing 1 to 2 cents higher. Growing domestic and global wheat stocks are a limiting factor for the wheat market, especially if demand doesn't dramatically improve. March Chicago wheat futures held support at the 40-day Moving Average. If that support is violated, next support is at $5.18 and then at the contract low of $4.71.


Cash cattle expectations: $1 to $3 higher. The beef market followed up Monday's strong start with additional price gains of $1.66 (Choice) to $2.47 (Select) on movement of 272 loads Tuesday. With the beef market strengthening, talk of higher cash cattle trade in the Plains is building. Most cash sources are expecting cash cattle trade in the $85 to $87 range after mostly $84 prices last week.

Futures call: Mixed. Futures are called to open mixed as traders wait on cash trade to develop. Nearbys could be supported by rising cash expectations, especially since February cattle are trading in line with last week's cash trade.

Cash hog expectations: Steady to firmer. The average pork cutout value was down $1.08 Monday, which will push some packer cutting margins into the red. As a result, some plants may opt to start trimming back kill hours in an attempt to boost margins, especially since hog movement will be slowed after another dumping of snow overnight.

Futures call: Mixed. Futures are called to open mixed amid spreading, and as nearbys have trimmed their previously loft premium to the cash index. At $5, the premium nearbys hold to the cash index is much more in line than $12 seen last week. The Jan. 2 chart gap at $60.95 remains open on the daily price chart for January hogs. If that gap is filled, support lies at the contract low of $58.90.


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