Julianne Johnston Pro Farmer Senior Markets Editor
From Pro Farmer
Updated as of 7:00 a.m. CT
No Bullpen tomorrow... I'll be out of the office tomorrow. Next Bullpen will be Friday!
Cold Storage Report shows tightening red meat supplies... Yesterday's Cold Storage Report showed belly stocks surprisingly declined from month-ago, with USDA reporting 73.331 million lbs. of pork belly stocks at the end of March. This was well below the average trade guess of 79.5 million pounds. Belly stocks came in 26% below year-ago and are down 3% from last month. With the bacon season still approaching and hog supplies tightening, the report should cause some "price rationing."
USDA reported total pork stocks in cold storage at 593.197 million lbs., also well below expectations of 633.3 million pounds. Total pork stocks are down 10% from last year and 5% below the previous month, reflecting a solid drawdown, which should also be supportive for lean hog futures.
Total beef stocks at 422.457 million lbs. are down one percentage point from last year at this time and are down 3% from last month. There wasn't a pre-report guess, but the drawdown from last month should be viewed as supportive, especially with cattle supplies tightening.
Total red meat supplies are down 4% from last month and 6% below year-ago levels. Meanwhile, total poultry stocks were up 3% from last month, but down 4% from year-ago.
Bottom line: Tightening supplies, especially compared to last year, should help to limit downside risk in the meat markets, but demand will remain key as we move forward as consumers are still being very careful when making meat purchases due to the economic crunch.
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Opening calls. These calls originate more than three hours before the open -- use caution, things change:
Corn: 2 to 3 cents higher. Futures saw spillover gains in overnight trade. Futures remained in positive territory yesterday, finishing around 4 to 5 cents higher, which was a mid-range close. Corn saw short-covering on ideas Monday's losses were overdone to create a "Turnaround Tuesday" correction. May corn filled in Monday's gap area, but need to return above the $4.00 level to generate fresh technically based buying.
Soybeans: Mixed. Futures were 3 cents higher to 3 cents lower, with nearbys firmer. Futures closed 19 1/2 to 30 cents higher yesterday to recoup most of Monday's losses. A combination of strong fundamentals and technical-based buying allowed gains to be sharply extended. November soybean futures bounced before a full test of the uptrend from the March low. Resistance lies at last Friday's high at $9.52 1/2 and then the February high at $9.60.
Wheat: 5 to 6 cents higher. Futures were firmer overnight amid short-covering. Futures posted slight gains yesterday and finished mid-range. Most of the support came from corrective buying and spillover from general commodity strength. A little fundamental support came from concerns with HRW crop conditions and the slowing planting pace for spring wheat. Key near-term support for July Chicago wheat is at the March low at $5.10 3/4. A drop through that level would open downside risk to the contract low at $4.97.
Cash cattle expectations: Watching beef market. Boxed beef prices were another $1.47 to $1.52
higher Tuesday, but movement slowed to only 164 loads for the day. If beef prices continue to strengthen, it greatly increases chances packers will raise cash cattle bids in the Plains. But beef movement must strengthen or talk that a short-term fundamental top is in the works will build.
Futures call: Firmer. Cattle futures are called to open firmer based on spillover from yesterday's gains and continued beef market strength. June live cattle posted an inside day of trade on the charts, erasing above half of yesterday's losses. The high-range close signals the potential for spillover gains tomorrow morning.
Cash hog expectations: Steady to firmer. Market hog numbers are tightening, plus field work will be active in the western Corn Belt. As a result, demand for available supplies is expected to remain high despite negative cutting margins. While the average pork cutout value was 80 cents lower Tuesday to further weaken margins, cash hog bids are expected to be steady to $1 higher at most locations today.
Futures call: Firmer. Futures are called to open firmer based on spillover from yesterday's gains, but upside potential will be limited as futures remain at a steep premium to the cash index. June lean hog futures posted an inside day on the daily chart. Monday's low and high serve as initial support and resistance.