Dollar Weakness Spurs Seasonal Buying in Corn, Soybeans

October 5, 2011 02:02 AM

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

Corn: 3 to 10 cents higher. Futures enjoyed short-covering support overnight as traders reevaluate positions. Strong harvest progress is expected this week, supporting ideas of a seasonal low being in the works. There are also some rumors of Chinese buying after yesterday's story about USGC's new Chinese crop and demand estimates. Weakness in the U.S. dollar index also bolstered buying in the commodity world overnight.

Soybeans: 11 to 13 cents higher. Futures were firmer overnight amid short-covering and help from a weaker U.S. Dollar index. The dollar softened amid talk of Europe funding banks and Bernanke pushing funds into the U.S. economy. Meanwhile, talk of a seasonal low being in the works also supported buying. But as we've warned before, bottom pickers should beware as the risk appetite still remains shaky in the commodity markets.

Wheat: 5 to 11 cents higher. Futures enjoyed spillover from neighboring pits and well as help from weakness in the U.S. Dollar index. Wheat is in a follower's role currently, as focus is on the Midwest harvest. Upside potential will be limited to short-covering, as traders are watching weather forecasts which are promising of widespread soaking rains for much of the Southern Plains this weekend. Rains would be timely given ongoing planting and emergence of winter wheat.

Live cattle: Mixed. Futures are called mixed following yesterday's sharp losses. Weakness in futures spurred the start of cash cattle trade, which came in steady with the top end of last week's trade at $121. Trade was picking up at this level late yesterday afternoon. October live cattle are trading in line with this week's cash trade. How prices fluctuate the remainder of the week will signal traders' near-term cash expectations. With packers working on improving negative profit margins, there is some additional near-term downside risk for the market.

Lean Hogs: Mixed. Futures are called to open mixed amid more spreading. Nearby futures were supported yesterday by ongoing cash improvement. October hogs are trading at around a $2 premium to the cash index, as they factor in additional near-term cash improvement. Weakness in the U.S. Dollar index could spur widespread buying in the hog pit.


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