More Technical Damage in Crude Oil

December 2, 2008 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Crude oil drops below support... Crude oil futures fell through support at the November low yesterday, causing increased pressure in the bean pit through the day. Bean futures also violated support to dip below the two-month consolidation range. Given the increasingly bearish technical makeup of the market, both moves increase the risk for additional near-term price pressure.

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

Corn: Steady to marginally lower. Futures were steady to just below unchanged overnight in light trade. Futures spent yesterday pivoting around unchanged and closed fractionally to 2 cents lower. Futures held in a tight trading range throughout the day. While the market tried to firm on corrective short-covering, buyer interest was limited as outside markets provided mixed signals.

Soybeans: 2 to 3 cents lower. Futures saw slight losses overnight in light trade. Futures opened firmer yesterday but quickly eroded as crude oil futures broke support levels. How outside markets perform will largely direct price action in the soy complex this month, especially with volume likely to be reduced due to the holidays. That's not to say a major fundamental development wouldn't move soybean prices -- it just keeps traders focused on outside markets.

Wheat: 5 to 6 cents lower. Futures opened firmer and quickly turned mixed. Choppy outside markets kept wheat prices choppy yesterday, but upside potential through the day was limited by negative economic and demand news. Egypt snubbed the U.S. on their latest purchase, and Iraq also reportedly purchased Canadian, along with German and/or Russian supplies. As a result, traders believe U.S. wheat is not competitively priced.

Cash cattle expectations: Watching beef market, futures. Cash cattle trade isn't expected until later this week, but cash opinions are in the process of being formed. Most traders expect softer cash bids after packers increased them $2 to $3 in the Plains last week. Post-Thanksgiving beef movement has been very sluggish thus far and there are concerns with how beef demand will be impacted by economic struggles.

Futures call: Weaker. Futures are called to open lower today on expected weakness on Wall Street. Futures extended losses into the close yesterday to finish near session lows. Persistent economic concerns caused traders to use the early strength yesterday as a selling opportunity. With the low-range close, cattle futures are susceptible to followthrough selling this morning, especially if outside markets are price-negative.

Cash hog expectations: Mostly steady. Early expectations are for mixed cash bids this morning, as some packers say this week's needs have been mostly secured. Pork values were firmer again yesterday, which should help maintain a steady cash tone.

Futures call: Mixed. Futures are called to open mixed, as upside potential is limited by the premium futures hold to cash. Futures could see weakness if cattle futures are sharply lower. The cash hog market is called mixed, which could also limit buying interest. The CME lean hog index is projected up 39 cents to stand at $54.10. December hogs hold around a $4 premium to the index.

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