Forecast Flip-Flops

February 5, 2009 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Concern is now for a return to hot and dry conditions... ... in South America by early next week. After starting the month under pressure, soybean futures have posted a solid recovery from support levels. Traders are keeping a very close eye on the South American weather situation, with some of the support yesterday coming on word Brazil's government lowered their corn and soybean estimates from their previous forecasts to reflect dryness. Scattered showers were seen in Argentina Wednesday and Thursday and there are more scattered rains in the near-
term forecast. But the longer-term outlook has turned hot and dry. In southern Brazil, rains are being termed as disappointing in Rio Grande do Sul after more widespread rains were seen in other areas. 

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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 higher. Futures found spillover support overnight from yesterday's late gains. Futures extended gains in late trade to finish 12 to 13 cents higher yesterday. Early support for corn came on spillover from neighboring pits, with futures extending gains in late trade as concerns increase about the South American corn crop and from the recent increase in demand. March corn futures penetrated resistance at the previous day's high in late trade to post a slight upside day of trade on the charts.

Soybeans: 15 to 17 cents higher. Futures were higher overnight on spillover from yesterday's gains. Futures finished mostly 25 to 30 cents higher to  post a high-range close yesterday. Futures were supported by short-covering, South American weather concerns and some help from outside markets. The dollar ended firmer after being choppy, but crude oil was firmer and the stock market was higher. March soybeans posted an upside day of trade on the charts.

Wheat: 5 to 6 cents higher. Futures were higher overnight on spillover buying. Futures extended gains into the close to post a high-range close, with Chicago closing 17 to 19 cents higher. Ideas recent losses have been overdone resulted in early support, with additional support coming on spillover from the soybean pit. Futures managed to extend early gains, but finding spillover support tomorrow morning could be difficult given the lack of fresh positive news.


Cash cattle expectations: Light trade beings. Nebraska cattle traded $1 higher than last week on Thursday. Although no significant cash trade was reported in Kansas and Texas, the firmer prices in Nebraska point to $82-plus trade in those states today.

Futures call: Steady to firmer. After choppy price action this week, futures are called to open steady to firmer based on news of $1 to $2 higher cash cattle trade in the Plains. April live cattle posted a high-range close yesterday, signaling the potential for spillover buying this morning. If cash trade turns active at $82, it would help to limit downside risk for nearby live cattle futures.

Cash hog expectations: Steady to weaker. A few packers may increase their pursuit of cash hogs across the Midwest as they look to fill in Saturday kill runs and buy hogs for next week. But most packers are focused on trying to improve ailing margins. Cash hog bids are expected to be steady at most Midwest locations to close out the week, with some lower bids expected.

Futures call: Steady to weaker. Futures gapped lower on yesterday's open and remained under pressure through the session. February hogs posted a low-range close while the rest of the pit posted a high-range close. Lean hog futures saw technical-based selling, as the weakening technical picture continues to feed on itself. But most contracts came off session lows amid short-covering. But February hogs posted a low-range close as traders are concerned about the near-term cash outlook, with packer demand for hogs lackluster as they work to improve negative cutting margins.


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