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Market 'Over-Reacts' to News Cargill Beef Plant Will Idle

06:22AM Jan 18, 2013

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Overnight highlights. Following are opening grain and livestock calls at 6:25 a.m. CT:

Corn: 1 to 4 cent higher. Following yesterday's softer price action and low-range close, futures are firmer this morning. Corn is working on strong gains for the week as traders still have last week's USDA reports on their minds that dropped carryover to razor-thin levels. Strength in the dollar index is limiting buying this morning.

Soybeans: 3 to 8 cents higher. Futures have seen lackluster trade so far in the overnight session following yesterday's softer finish. Traders' focus is on the potential for a record South American crop, as yesterday's new marketing year record high sales report provided only momentary support for soybean futures. Futures are working on solid gains for the week, with the dollar limiting buying enthusiasm.

Wheat: 2 to 4 cents higher. Futures are seeing spillover from neighboring pits, with buying limited by strength in the dollar index and a lack of fresh news. Traders are keeping an eye on Australia weather, although with harvest mostly complete, this has little impact on prices. Yesterday's forecast that drought will linger into spring in the Southern Plains is much more concerning.

Live cattle: Mixed. Futures came well off session lows into the close yesterday as traders over-reacted to news that Cargill will idle a plant in Texas beginning in early February. Traders fear this means cattle feedlots will become backed up, but this plant was running at reduced slaughter capacity for quite some time and supplies are tight. With February live cattle trading in line with the cash market, traders could view futures as a value buy as the price outlook for the year is still quite bullish.

Lean hogs: Mixed. Futures are expected to see a choppy start as traders reevaluate positions ahead of the weekend. Packers' profit margins have slipped back well into the red which raises questions about near-term demand for cash hogs. Pork cutout values slipped just 37 cents yesterday, but the rise in the cash market has outpaced that of the pork market this week.

Reminder: Markets closed on Monday. The markets will be closed on Monday in observance of Martin King Luther Jr. Day.