Focus on Squaring Positions Ahead of USDA Data

February 8, 2012 12:41 AM

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

Corn: 2 to 4 cents higher. Futures were firmer overnight on help from dollar weakness and ahead of tomorrow morning's USDA reports. According to pre-report expectations (click here for link), traders look for the report to show carryover down around 50 million bu. from last month due to an increase in exports. USDA's Weekly Export Sales Report has shown the pace of sales above what's needed to reach USDA's export forecast.

Soybeans: 5 to 8 cents higher. Futures were stronger overnight on help from dollar weakness and expectations tomorrow's USDA reports will show a drop in global and domestic carryover levels. Traders widely expect USDA to lower their South American crop estimates to tighten the global supply picture, with U.S. carryover expected to decline by 6 million bu. from last month. Traders have been hesitant to extend long positions ahead of the report at the risk USDA won't trim the South American crops as much to come in line with most private estimates.

Wheat: 2 to 4 cents higher. Futures benefited from dollar weakness and spillover from neighboring pits. Concerns about winterkill in northern Europe and parts of the Former Soviet Union have been lessened this week as temps have moderated. Wheat needs fresh demand news to keep bulls interested. Traders expect USDA to trim carryover by around 2 million bu. in tomorrow's S&D Report. Given the little expected change in domestic carryover, traders have been hesitant to push futures too far in either direction so far this week.

Live cattle: Steady to higher. Futures are expected to see a boost from strength in the boxed beef market. Futures posted a strong turnaround yesterday on indications the beef market has posted a near-term low. Choice and Select beef values rose around $1 yesterday, raising expectations for firmer cash cattle trade. Packers so far have been hesitant to raise bids due to their negative cutting margins, but feedlots are expected to demand higher bids. Cash trade could drag on until Friday.

Lean Hogs: Mixed. Futures are expected to be mixed amid cash uncertainties, but pressure should be limited by yesterday's firmer pork cutout values -- rising 43 cents. While packers' profit margins still need to improve to boost demand for cash supplies, cash sources say market-ready supplies are tightening. Traders expect a seasonal uptick in demand to be seen soon, but are disappointed it has been delayed compared to previous years.


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