Mildly Improved Forecasts, Bird Flu Weigh On Grain/Soy Futures

April 22, 2013 01:20 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn futures are trading 5 to 8 cents lower, soybeans are 5 to 9 cents lower and wheat futures are 2 to 7 cents lower with Chicago and Kansas City contracts leading declines. Based on overnight trade, modestly improved weather forecasts and bird flu concerns, grain and soy complex futures are expected to open the day session under pressure at 8:30 a.m. CT. Cattle futures are called slightly lower on the open, while lean hogs are expected to favor a mildly firmer tone.


* Some forecasts improve. Some private forecasters are calling for warmer and drier conditions across the Corn Belt than previously expected, which weighed on corn futures overnight. But even if these improved forecasts pan out, it's going to take some time before soils are ready for producers to move into fields across much of the region. And not all forecasters are in agreement. In fact, some are still calling for multiple precip chances this week Meanwhile, the National Weather Service forecast for April 27-May 1 calls for above-normal temps over most of the country with the exception being the far northern Corn Belt, which is expected to see normal to below-normal temps. Above-normal precip is seen from eastern Minnesota and Iowa eastward during the period. Below-normal precip is forecast for the far western Belt.

The long and short of it: Weather is seen as price-negative to start the week. But this afternoon's reminder of the very slow corn planting pace could flip traders' attitudes.

* Bird flu cases rise. As of Sunday, China had 102 confirmed cases of H7N9 bird flu, with 20 of those resulting in deaths. An official with the World Health Organization told Dow Jones newswire there may have been limited human-to-human transmission of the disease, though there has been no sustained such transmission. Unlike previous strains of avian flu, infected birds are showing no signs of being sick, making it harder to stem the disease at its source. Meanwhile, Chinese media estimates the poultry industry has lost 17 billion yuan ($2.7 billion) because of H7N9.

The long and short of it: The bird flu outbreak is reducing Chinese feed demand, which is a negative for soybeans. It's now expected Chinese soybean imports will decline year-over-year for the first time in eight years.

* Placements higher than expected. Last Friday's Cattle on Feed Report was bearish, with all three categories coming in on the negative side of the average pre-report expectations. The biggest shocker was Placements, which came in 6% above year-ago, with all weight categories up from March 2012. That left many analysts, including myself, wondering where the extra calves to place into feedlots came from. The reason isn't as key as the fact there will now be more market-ready supplies down the road.

The long and short of it: The report data should weigh on cattle futures today, with deferred contracts expected to lead losses on the Placements surprise. But given the negative posture of the market, this could turn into a classic report fade.


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