Corn futures extended to the upside with the start of the day session, but have since settled back to trade around 2 cents higher in old-crop contracts and slightly lower in new-crop contracts.
- Corn futures are being bull spread as traders feel prices may have dipped far enough to spur an increase in end-user buying.
- Buying interest in new-crop corn is being limited by forecasts for rain in the Corn Belt. While this will delay spring fieldwork activity, precip is welcome as soils are dry, especially in the western Corn Belt.
- Traders are also beginning to ready for the Supply & Demand Report Wednesday.
- Pre-report expectations are for USDA to increase its 2012-13 U.S. corn carryover projection. USDA is also expected to lower its Argentine corn production estimate by 0.8 MMT from last month to 25.7 MMT. Traders expect USDA to estimate Brazil's production at 72.9 MMT, up 0.4 MMT from March.
Soybean futures are double-digit higher in old-crop contracts, while new-crop is up 3 to 6 cents.
- Soybeans continue to benefit from corrective short-covering and hopes prices have dipped far enough to spur some value buying.
- Buying interest in new-crop beans is being limited by prospects that a delayed start to corn planting could boost soybean acres from March intentions. Rain in the forecast throughout the week in the Corn Belt are supportive of this.
- Traders are also covering some short positions ahead of USDA's Supply & Demand Report Wednesday. Traders are concerned the report may not line up with USDA's Quarterly Grain Stocks Report that indicated larger-than-expected supplies.
- Light support also stems from expectations USDA on Wednesday will trim both its Argentine and Brazil production estimates to 50.6 MMT and 82.8 MMT, respectively.
- The Chinese bird flu situation has gained worldwide attention, but traders say as long as the situation remains contained, further downside risk for soybean futures should be limited.
Wheat futures have extended gains from the overnight session to trade double-digit higher at all three locations with Kansas City leading to the upside with gains in the mid-teens.
- Kansas City futures are getting a lift from concerns about the condition of the HRW wheat crop. USDA will release its weekly condition data later this afternoon; it is expected to reflect further deterioration.
- Meanwhile, traders are watching weather forecasts closely as there are some freezing temps in the outlook for the Central and Southern Plains.
- The Southern Plains are expected to receive beneficial rains over the next five days, though the 6- to 10-day and 8- to 14 day forecasts call for below-normal precip chances.
- The state-run China National Grain and Oils Information Center confirmed over the weekend the country purchased 14 to 16 cargoes (nearly 1 MMT) of U.S. SRW wheat late last week. This news is already factored into prices, but it raises hope that other countries will follow with stepped-up purchases.
Live cattle futures are off to a mixed start, with most contracts favoring the upside. Feeder cattle futures are enjoying slight to moderate gains.
- Traders are engaging in some light position evening to start the week.
- The fact that the front-month contract is at a discount to last week's trade at $128 in the Southern Plains signals uncertainty about beef demand in the face of a slow-growing economy.
- Friday's boxed beef action was highly disappointing. Choice cuts slid 40 cents and Select fell $1.24 on very light movement of 104 loads.
- Outside markets are also limiting buying interest as the U.S. dollar index is firmer and the stock market is under pressure.
- Feeder cattle futures are benefiting from short-covering amid ideas the downside has been overdone.
Lean hog futures are enjoying moderate gains in most contracts this morning.
- Lean hogs are enjoying corrective short-covering amid ideas the downside was overdone Friday.
- Plus, the cash hog market is off to a slightly firmer start, signaling tightening supplies. Some packers are expected to keep bids steady, however, as they are dealing with negative cutting margins.
- The mandatory reported market showed the pork cutout value rose 42 cents Friday on movement of 392.3 loads, while the voluntary market showed the pork cutout value slipped 17 cents on very light movement of 24.50 loads.
- This adds to concerns about a weak economy and shrinking disposable incomes trimming meat demand, despite the trend for a seasonal grilling-inspired rally.