What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are 2 to 4 cents lower in all but the July contract, soybeans are 13 to 15 cents higher in old-crop contracts and 2 to 3 cents higher in new-crop contracts, while wheat futures are 3 to 5 cents higher. Based on overnight trade, I expect corn to mildly favor the downside this morning, while soybeans and wheat should open firmer. Cattle and hog futures are expected to open with a mixed tone this morning.
* USDA post-report: Demand needed. Last Friday's Acreage Report signaled U.S. producers planted more corn and soybeans than intended in March despite planting problems through much of the Corn Belt. USDA's June planted acreage figures increased nearly 100,000 acres for corn and roughly 600,000 acres for soybeans. The corn data was especially price-negative as traders were anticipating a reduction in acreage from March intentions. Combined with perceptions that weather conditions are turning favorable, corn futures are reeling. December corn futures have dropped below the April low, which opens the door to fresh technical-based selling pressure. To stop the price slide, end-user buying must pick up. We are now at price levels that have attracted fresh demand in the past, but with the crop planted and growing (though behind the normal pace), it may take a lower price than before to attract end-user demand. On a positive note, two South Korean feedmakers tendered to purchase corn over the weekend, suggesting the price drop is enough to attract some end-user buying.
The long and short of it: USDA's puts the onus back on bulls and the focus on demand to signal prices have dropped low enough.
* Macro focus: China's manufacturing sector weakens, U.S. employment data Friday. China's official purchasing manufacturers' index (PMI) slipped to 50.1 in June from 50.8 in May, according to the National Bureau of Statistics. The sub-index for new orders declined from May, signaling weaker demand for Chinese products. Meanwhile, China's final HSBC PMI dropped to a nine-month low of 48.2 in June from 49.2 in May. That was also a tick lower than the preliminary data. On the U.S. front, focus is on Friday's jobs report from the Labor Department. With the Fed expected to taper its bond-buying program, possibly by this fall if economic data strengthens, there's more focus on the jobs data as employment is one of the Fed's keys.
The long and short of it: The Chinese manufacturing data is negative for commodities, but investors will put more focus on the jobs data this week.
* Mostly neutral H&P Report. The U.S. hog herd as of June 1 came in just barely below year-ago in terms of total numbers. The total number of market hogs and breeding hogs are virtually unchanged from year-ago. Traders were anticipating a slight uptick in the total number of hogs, with a modest increase in market hog numbers. The steady-with-year-ago spring pig crop is the result of a 2% drop in March-May farrowings and a 2% increase in pigs per litter. With optimism in the hog industry building, producers indicated intentions to hold summer farrowings steady with year-ago and to increase fall farrowings by only 1%. But, if market hog prices remain firm and feed prices soften, I wonder if second-half farrowing intentions in this report won't prove to be light.
The long and short of it: With most of the report numbers coming in close to the average pre-report guesses, the data is mostly neutral for hog futures. Most of traders' focus will be on the cash and product markets as they watch for signs of a seasonal top.
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