Pro Farmer Senior Markets Editor
From Pro Farmer
Updated as of 7:00 a.m. CT
Dow pressured by auto industry's future... On the final bell yesterday afternoon, the Dow Jones Industrial posted its lowest close since February 2003. The Dow is now just hovering above the Oct. 6, 2008 intra-day low. The major index slipped as investors remain nervous about the future of America's auto industry, as well as poor economic data posted earlier in the morning.
Weak readings on the nation's housing market and a sharp decline in consumer prices drove down shares of financial services firms yesterday. The U.S Department of Labor yesterday reported consumer prices
declined by a record amount in October, another sign the economy is
contracting. The Consumer Price Index, a key inflation reading, fell 1%
last month. Investors expected a 0.8% decline. This is the largest drop in
prices since the Labor Department began gathering data in Feb. 1947.
In July 2008, consumer prices reached 17-year highs, driven largely by
record energy prices. But the fall from those record levels now has
economists worried about deflation. This of course, has weighed heavily on
all commodity markets. The economic downturn has already caused a windfall
of lost jobs and economists worry that rising unemployment would cut
demand even further, maintaining pressure (or at least limiting upside
potential) for most commodity markets.
Overall, the grain markets have reacted surprisingly well to poor economic data, as they remain in a month-long consolidation phase. But if the Dow continues to sink and the dollar strengthens on fears other global economies are doing even worse than ours, it could result in the next wave down in the commodity markets.
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Opening calls. These calls originate
more than three hours before the open -- use caution, things change:
Corn: 7 to 8 cents lower. Futures were weaker overnight on spillover
from crude oil weakness. Futures posted another choppy, two-sided day of price
action yesterday, but remained in a fairly tight daily range. Futures closed
1 1/4 to 2 cents lower, which was near session lows. Outside markets provided
mixed signals again, as the dollar opened weaker, firmed, but then weakened
Soybeans: 18 to 20 cents lower. Futures were weaker overnight on spillover
from crude oil weakness. Futures closed slightly lower yesterday after seeing
two-sided trade. January soybean futures continue to hold well within the
established trading range, which has contained prices since early October.
Support at the bottom of the range is at $8.38, while resistance at the top
of the range is at $10.03. The longer futures hold within this range, the
more likely a strong trending move comes on an eventual breakout.
Wheat: 6 to 8 cents lower. Futures were weaker overnight on
dollar strength. Futures closed weaker after seeing mixed trade throughout
the day yesterday. Without very limited fundamental support, wheat needs help
to generate sustained buyer interest, which means the upside will remain limited
to corrective buying near-term.
Cash cattle expectations: $1 to
$2 lower. Cash cattle trade was active at $3 to $4 lower prices in
Nebraska. The combination of sharply lower cash trade in Nebraska and heavy
pressure on live cattle futures this week is expected to weigh on cash cattle
prices in Kansas and Texas. Most cash sources are now expecting cash trade in
the Southern Plains to be at least $2 lower than last week at no better than
Futures call: Weaker. The path of least resistance is lower, so cattle futures are called to open weaker again, but at any point could see a short-covering bounce given oversold conditions. Early support for cattle futures came on short-covering, as well as a
firmer start to the day for the Dow Jones Industrial Average. But
attitudes changed as the stock market turned lower, which led to a round
of sell stops being triggered.
Cash hog expectations: Mostly steady.
Cash sources expect mostly steady cash hog bids across the Midwest today
as many packers are still in need of late-week supplies before turning their
attention to buying hogs for early next week. Saturday's kill estimate is still
heavy, but down slightly from expectations earlier this week.
Futures call: Firmer. Futures are called to open firmer based on spillover from yesterday's gains, as traders believe the worst of the supply situation is behind them. February lean hog futures must clear the last reaction high at $63.75 to
break the pattern of lower highs and open the door to an extended bounce. If this resistance is not cleared, the pattern points to a fresh near-term
low for the contract.