Market Searching for Direction

January 21, 2009 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Prices action choppy... Until grain markets move above the January highs or violation support levels, they will remain in their choppy trading ranges -- searching for direction. Traders are anticipating some sort of a February break, but are also waiting for the acreage debate to heat up. As a result, we're sort of in 'no-man's land,' waiting to see what the dominate fundamental factor will be that will take futures out of this range.

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Opening calls. These calls originate more than three hours before the open -- use caution, things change:

Corn: 1 to 2 cents higher. Futures were firmer overnight on spillover from yesterday's gains. Futures opened weaker and favored losses yesterday, but saw late-session buying to finish mostly 5 to 6 cents higher, which was a near-session-high close. Corn favored a weaker tone through the day amid demand concerns, but saw spillover from neighboring pits in late trade, as well as due to gains in the stock market.

Soybeans: 5 to 6 cents higher. Futures were higher overnight on spillover from yesterday's gains. Futures closed mostly between 24 and 28 cents higher Wednesday, which was near session highs. Much of the support came from continued strong demand and concerns about the South America crop, as forecasters are taking more rain out of the near-term forecast for southern Brazil. High temperatures are increasing daily water needs, which is added to crop worries.

Wheat: 2 to 5 cents higher. Futures were higher overnight on spillover from yesterday's gains. Futures closed mostly around 20 cents higher yesterday, which was a high-range close. Futures were supported on the open by a larger-than-expected Egyptian wheat purchase, as the total tonnage of the deal was 178,000 MT. Tonnage was split nearly equal between the U.S., Russia and France, as they purchased 30,000 MT of U.S. SRW wheat. Traders are waiting on results from several other tenders, saying this signals U.S. prices have become more competitive on the global market.

Cash cattle expectations: Nebraska trades lowers. Light cash cattle sales were reported in Nebraska at $1 lower prices on a live basis and $3 lower in dressed prices. The lower Nebraska trade is likely a precursor of what to expect from cash cattle trade the rest of the week. Most cash sources are expecting cash bids steady to $1 lower in Kansas and Texas.

Futures call: Mixed. Futures are called to open mixed following yesterday's choppy price performance. Traders should begin to more actively prepare for Friday's Cattle on Feed Report. Traders look for the report to show On Feed and Marketings down from year-ago levels, while Placements are expected about equal to year-ago levels.  February live cattle finished 27 cents lower to post a slight downside
day of trade on the chats. Violation of support at last week's low reopens downside risk to contract-low support of $80.60.

Cash hog expectations: Mixed. Cash hog bids are expected to be steady to firmer in western locations as packers work to secure hogs for late-week kills, while steady to weaker bids are expected in eastern locations as most packers are filled up on kill needs there.

Futures call: Mixed. Futures are called to open mixed, but could favor a downward bias given yesterday's move to fresh contract lows in the February contract. February lean hog futures marked a new contract low of $58.60 before recovering slightly. More technical chart damage opens the door to additional near-term downside risk.

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