Post-Fourth Price Pressure

July 8, 2008 07:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Keep an eye on the charts... There's no doubt the corn and soybean markets have seen sharp price pressure so far this week. But the "ability" of the markets to come off session lows and respect some important support levels yesterday could signal the market is searching for support. I only say "could signal," as the only thing I feel "sure" about is prices will remain volatile! The grain markets could certainly see an extended price correction near-term and still remain in their longer-term uptrends.

I also wonder how much price pressure the corn and soybean markets would have seen so far this week if it weren't for the sharp decline in the crude oil market. Outside market influences have provided spillover speculative-related selling pressure.

But we have to respect the seasonals of the market and the trend. As I wrote last week (as I do each year before July 4th), trends are typically accelerated or reversed after the July 4th period. The recent rains we have received have been timely, and the market perceives them as beneficial for the crop.

Keep your comments coming. Always good to have conversation with you and input on what you'd like to talk about. E-mail your comments/question to me by clicking here. Please include your location.

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

Corn: 7 to 10 cents lower. Futures were weaker overnight amid continued liquidation pressure. Futures saw sharp early pressure yesterday on spillover from Monday's limit losses and overnight rains. Traders say the weather models signal some more rains are in the near-term forecast and temps should moderate, keeping crop stress at bay. Futures were also pressured as Monday's crop condition report showed slight improvement in the crop.

Soybeans: 6 to 11 cents higher. Futures were firmer overnight amid short-covering. Futures gapped sharply lower yesterday on spillover from Monday's mostly limit lower performance. Spillover pressure came from recent rains and a milder near-term forecast. Futures came off session lows around midday amid short-covering, signaling a potential near-term low has been posted. To confirm this, futures need to respect support at Tuesday's lows.

Wheat: Narrowly mixed. Futures were narrowly mixed overnight, favoring a slightly weaker tone. Futures opened lower yesterday and extended losses early on spillover from sharp losses in neighboring pits. Around midday, however, futures came off session lows and trimmed losses and closed mixed. The high-range close signals the potential for spillover support this morning, but how neighboring pits and outside markets perform will also be important. Some of the support in the wheat pit came on spread unwinding with the corn market.

Cash cattle expectations: Watching beef market. General strength in the beef market has traders looking for at least a dollar improvement in the cash market from last week's $101 to $102 trade. This week's showlist is smaller, which should give feedlots some bargaining power. But with cash trade still not likely until Friday, choppy trade in futures is expected.

Futures call: Mixed. Futures are called to open mixed on the possibility of short-covering, but could see spillover from yesterday's losses. Further downside risk should be limited as the beef market remains strong and traders generally look for at least a dollar improvement from last week's $101 to $102 trade. This week's showlist is smaller, which should give feedlots some bargaining power. But with cash trade still not likely until Friday, choppy trade is expected today.

Cash hog expectations: Steady to weaker. Despite very strong profit margins, packer demand for hogs remains lackluster, as they say adequate supplies are being seen. A couple of plants have increased their Saturday kill requirements, but so far, cash sources say most are sticking with their original plans for a moderate Saturday kill. The cash hog market is called steady to weaker again this morning.

Hog futures: Mixed. Futures are called on more spreading and range-bound trade. August lean hog futures posted an inside day of trade on the charts yesterday, remaining within the boundaries of the recent consolidation range. Support lies at last week's low of $70.20 and resistance lies at the recent high of $71.70. s

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