Corn/Soybeans Complete 25% Retracement

January 6, 2009 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

2009 is off to a strong start... The grain markets posted a strong day of trade yesterday as sell stops were triggered. Several fundamental factors were noted behind the gains, but traders also said the improved technical situation is feeding on itself.

January soybeans closed above the $10.00 level yesterday for the first time since October 3. Futures have completed a 25% retracement of the decline from the July high to the December low. The 38% retracement lies near the $11.00 level.

March corn pushed above the December high yesterday to reach the highest level since Nov. 5. The contract has also completed a 25% retracement of the decline from the June high, although it has yet to close above this retracement level. Doing so would open upside potential to the 38% retracement level, which lies near $5.00.

Both corn and soybeans are strongly suggesting near-term lows have been posted. If you need to get caught up on 2008-crop cash sales, use this rally to get current with advice.

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

Corn: 2 to 4 cents lower. Futures were weaker overnight amid profit-taking. Futures closed 15 to 16 cents higher yesterday, which was on or near session highs. Corn opened higher and firmed throughout the session on support from fund buying and general commodity strength. Traders are paying close attention to the fund activity to see if there are signs of an aggressive return to the long side of the market.

Soybeans: 5 to 8 cents lower. Futures were weaker overnight amid profit-taking and due to a choppy tone in crude oil overnight. Futures closed 26 to 29 cents higher, supported by South American crop concerns, strength in crude oil and continued strong demand from China. The improved technical situation is also feeding on itself.

Wheat: 7 to 8 cents lower. Futures were weaker overnight amid profit-taking and on spillover from neighboring pits. Futures posted 20-plus cent gains at all three exchanges. Spillover from neighboring pits and widespread commodity buying helped trigger buy stops. The improved technical situation is beginning to get more attention. March Chicago wheat posted a strong upside day of trade on the charts. Next resistance lies at the $6.50 level.

Cash cattle expectations: Steady to $1 higher. Beef prices were 17 cents lower (Choice) to 61 cents higher (Select), but movement improved to 313 loads Tuesday. With solid movement through the first two days of the week,
hopes for steady to firmer cash cattle trade compared to week-ago are building. But active cash cattle trade isn't expected until late this week and the beef market must continue to strengthen to get packers to raise cash cattle bids from last week's mostly $87 prices in the Plains.

Futures call: Firmer. Futures are called to open higher on spillover from yesterday's highs, although futures closed off session highs. February live cattle poked above last Friday's high at $89.05, but failed to find followthrough buyer interest at that level. The contract did, however, close at the highest level since Nov. 17. The contract also managed to close 5 points above the neckline of the inverted head-and- shoulders formation on the daily chart. Another higher close Wednesday would open the upside to the upside to the November high at $95.60.

Cash hog expectations: Steady to firmer. The average pork cutout value was up $2.54 on strong movement of 128.1 loads. While the overall cutout value was sharply higher, the price strength was in hams, picnics and Boston Butts, while other cuts were lower. Nevertheless, the higher pork cutout value helps packer margins and will keep cash hog bids steady to firmer.

Futures call: Mixed. Futures are called mixed on continued spreading. February lean hogs posted a high-range close and extended their premium to the cash index to around $12, which signals traders look for additional near-term improvement. But this opens the door for downside risk as the premium is too lofty.

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