Dollar Strength Pressures Grains Overnight

October 13, 2011 01:39 AM

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

Corn: 5 to 7 cents lower. Futures were weaker overnight amid dollar strength as well as traders digesting yesterday's higher-than-expected 2011-12 carryover peg. December corn posted a mid-range close yesterday and traded in the lower half of yesterday's range overnight. There are even national news reports the U.S. corn stocks situation is now abundant (which of course it is not). December corn seems to be pivoting around $6.40, which signals a seasonal low has been posted. But need to work higher to confirm a low.

Soybeans: 4 to 7 cents lower. Futures were weaker overnight amid dollar strength, which triggered sharp losses in crude oil and gold is also lower this morning. Yesterday's USDA reports were friendly for the bean market, as it revealed a smaller crop than last month and USDA trimmed carryover. Nearby bean futures ended slightly higher after seeing spillover from corn and wheat and futures posted a narrow range overnight, pivoting around $12.35.

Wheat: 3 to 6 cents lower. Futures saw followthrough from yesterday's sharp losses, as traders reacted to USDA's reports with sharp losses. Sell stops were triggered yesterday after USDA raised carryover. Traders expected a slightly lower carryover peg after USDA lowered the wheat crop in the Small Grain Summary. With little fresh other news for the market to digest, wheat is vulnerable to additional near-term pressure. Support for December Chicago wheat lies near $6.00, which is near this month's double low.

Live cattle: Mixed. Futures are called mixed as traders wait on cash trade to begin. Upside potential, however, will be limited as the atmosphere for adding risk is not good this morning given strength in the U.S. dollar and expected weakness in the U.S. stock market this morning. Choice beef prices were $1.04 higher yesterday and Select declined 18 cents to widen the spread between the two -- signaling the need for finished cattle. Beef movement has been strong this week, but packers' profit margins are well in the red, limiting demand for cattle. How futures trade today could determine how the cash market performs.

Lean Hogs: Mixed. Futures are expected to be mixed, with pressure on nearbys limited by the discount they hold to the cash index. However, traders are comfortable with the discount structure as they expect additional near-term cash weakness as packers work to improve tight profit margins. Pork cutout values slipped $1.16 yesterday to further tighten margins. Cash bids are expected to be mostly $1 lower today. Also, strength in the U.S. Dollar will limit buying to short-covering.


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