What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are trading 1 to 2 cents lower, soybeans are facing bull spread unwinding with old-crop contracts 2 to 6 cents lower and new-crop 2 to 5 cents higher, and wheat futures are fractionally to 3 cents lower. Unless bullish demand news surfaces this morning, the negative price tone will extend into the daytime trading hours. Cattle futures are called lower on profit-taking, while hogs are also seen opening slightly lower.
* Watch out, major media 'knows' about cattle. The runup to record highs in the cattle/beef market is attention-grabbing. So much so that major media is now reporting the "news" and virtually "everyone" now knows about the record price levels. And because of that, it will be hard for the cattle market to continue to rally. Typically, markets top (or bottom) when the last to know finds out. There’s no doubt the recent pace of gains in boxed beef, cash cattle and cattle futures can’t be sustained — the price surge is too steep to last for an extended period. Most likely, the cattle market will soon post a short-term top, followed by a corrective pullback. Given tight supplies, however, downside risk is somewhat limited on the eventual price pullback after a short-term top is posted. And there is still strong enough fundamental backing in the cattle market that cattle futures could ultimately take out the current all-time highs at some point down the road. Tight supplies and just "enough" demand paint a bullish longer-term price outlook for cattle, barring an unforeseen bearish event.
The long and short of it: Now that "everyone" knows about the cattle situation, the easy money on the long side of the market is over. Further price strength will be harder to come by.
* Bird flu cases and concern builds in China. The number of human cases of H7N9 bird flu are on the rise, while at least two chicken flocks in the country have been culled due to the disease. Concern with a bird flu outbreak is rising as the country prepares for its vast Lunar New Year celebration that begins on Jan. 31 this year. And egg futures, which debuted on the Dalian Commodity Exchange in November, posted a new contract low overnight amid worries of a bird flu outbreak. But Chinese health officials continue to say their concern with a widespread outbreak is low.
The long and short of it: Chinese officials have done a poor job accurately portraying the bird flu situation in the past, which gives me pause when they are saying odds of a widespread outbreak are low. If concerns continue to escalate, it would be negative for grain/feed markets.
* Markets closed Monday. Grain and livestock markets will observe normal trading hours today ahead of the extended holiday weekend. All markets and government offices are closed Monday for Martin Luther King Jr. Day. Grain markets resume trade at 7:00 p.m. CT on Monday, Jan. 20, while livestock markets will reopen at 9:05 a.m. CT on Tuesday, Jan. 21.
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