Pro Farmer Senior Markets Editor
From Pro Farmer
Updated as of 7:00 a.m. CT
Outside market still key force in grain
markets... Crude oil futures tumbled $6.44 per barrel yesterday
on comments from Fed Chairman Ben Bernanke, who indicated inflation and high
fuel costs will cut U.S. demand for oil. The Fed Chairman's bleak economic outlook,
was the focus on the financial markets yesterday, with crude also moving lower
on the testimony to post the sharpest one-day drop since January 1991. Traders
also said oil supplies were stabilizing, which also pressured energy prices
After a stronger open, corn and soybeans quickly fell yesterday as crude
oil futures tumbled. No major technical chart damage was done to the crude
oil market yesterday. If crude oil continues to tumble, grain futures will
follow as the flow of money has been tied between outside markets closely.
But if crude oil recovers, focus in the grain markets will return to weather
and crop prospects.
Overnight, crude oil futures traded more than $2 lower, but remained above
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Opening calls. These calls originate
more than three hours before the open -- use caution, things change:
Corn: 1 to 3 cents lower. Futures were lower overnight on spillover
pressure. Futures closed mostly around 15 cents lower on spillover from soybeans
and crude oil. December corn has completed a 62% retracement of the rally
from the May low to the contract high. A 75% retracement at $6.44 corresponds
with the early June gap. Futures could correct to uptrending support drawn
off October and march lows without doing any serious technical chart damage.
That support currently intersects around $6.15.
Soybeans: 6 to 10 cents lower. Futures were weaker overnight on spillover
from yesterday's decline. Futures closed 40-plus cents lower after a firmer
on, with meal and oil seeing sharp spillover pressure. To do any technical
chart damage, beans need to move below the Late June lows, which would threaten
uptrending support. For August beans, that support lies at $14.95. The contract
has yet to complete a 25% retracement of the rally from the April low to the
contract high. That support lies at $15.20.
Wheat: 6 to 7 cents lower. Futures saw spillover pressure in overnight
trade from neighboring pits. Futures opened firmer yesterday on shrugged off
spillover from neighboring pits in early trade, but eventually turned weaker.
Wheat closed mostly 5 to 7 cents lower. Downside risk was limited by Monday's
surprising crop condition ratings, which showed spring wheat conditions down
sharply. Renewed concerns about dry conditions in areas of the Northern Plains.
Cash cattle expectations: $1 to
$2 lower. Texas feedlots began moving cattle at $98, while some light sales
were reported in Kansas around $97 Tuesday. Feedlots pulled back the reins on
cash sales later in the day, however, after cattle futures firmed modestly into
the close on short-covering.
Futures call: Mixed. Another choppy day of trade is expected, although
futures closed mostly firmer yesterday on short-covering and could see some
spillover support this morning. Key will be if futures can see additional
short-covering support this morning to stabilize the market following the
recent stiff retracement. However, unless futures can fill in Monday's gap
area, momentum remains with bears.
Cash hog expectations: Mostly steady.
Cash sources expect steady cash hog bids at most Midwest locations today
and softer prices to finish out the week as most packers are quickly filling
up late-week slaughter runs However, strength in the pork product market Tuesday
and strong cutting margins could keep bids firmer in some locations.
Hog futures: Mixed. Futures are called mixed on more spreading, as
traders reevaluate positions. July hogs expired at noon, CT, yesterday, at
$74.62. With the expiration of July hogs, August now assumes the role as the
lead-month contract and will be following the cash index more closely. The
index is projected up 44 cents to stand at $73.85 and August futures are trading
at around a $1.25 premium to the index -- which is considered in line with
cash for now. If traders expect additional near-term cash improvement, August
futures will continue to recover from the July lows.