Report Surprise?

February 10, 2009 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Report day... The biggest surprise coming from yesterday's USDA reports was how the markets responded. Traders were expecting a larger corn carryover figure, but USDA left it unchanged and soybean carryover came in tighter than expected. Wheat data was termed neutral by the market, but there is some disappointment that USDA left their Chinese wheat estimate unchanged after traders have added weather premium due to dry conditions there. Grain futures faced profit-taking pressure yesterday.

Additional pressure in the grain markets came on strength in the dollar and weakness in the stock market and crude oil market. Concerns about the stimulus package resulted in sharp stock market selling.

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

Corn: 2 to 3 cents lower. Futures were mostly around 3 cents lower overnight. Futures quickly extended early losses yesterday, but finished near session highs, closing marginally to 1 cent lower.  USDA kept corn carryover unchanged from last month -- making no changes to their S&D table. Traders had expected USDA to trim usage estimates again, but USDA has opted to watch market conditions for another month before making any changes, as recent export demand has been much improved. In addition, USDA announced a daily corn sale of 206,000 MT to Mexico for the current marketing year.

Soybeans: 7 to 11 cents lower. Nearbys were mostly around 11 cents lower overnight on spillover from yesterday's losses. Futures finished mostly 6 to 8 cents lower, which was mid-range for the day.  Yesterday's USDA reports were termed supportive for soybean futures, but futures turned lower on a combination of profit-taking, as well as improved rains in the near-term forecast in South America. USDA lowered their South American soybean estimates, but if timely rains continue this month, traders say estimates could stabilize or even turn slightly higher. As a result, given the forecast for rains in areas of Argentina and southern Brazil the remainder of the week, traders were hesitant to add more weather premium into the market.

Wheat: 6 to 7 cents lower. Futures were mostly around 6 cents lower overnight. Futures closed mid-range after seeing sharp losses in morning trade. Chicago wheat closed 7 to 9 cents lower. Traders viewed USDA's data as neutral, as USDA's carryover figure of 655 million bu. was unchanged from last month. Traders expected a slight drop in the figure from last month, but said they aren't surprised USDA has decided to wait another month before making changes to their usage estimates. There was some disappointment that USDA left their Chinese wheat estimate unchanged after traders have added weather premium due to dry conditions there. Traders say they believe USDA's China wheat crop estimate is too high, but rains are in the near-term forecast.

Cash cattle expectations: $2 higher. Cash sources say cash trade could get underway today, although packers haven't been actively bidding for cattle yet. Beef values were firmer again yesterday on decent movement of 236 loads -- but nothing impressive. Expectations are for $2 higher cash trade.

Futures call: Mixed. Price action is expected to be choppy as traders wait on cash trade to develop. Futures moved off session highs as sharp losses in the stock market resulting in traders easing long positions. April live cattle gapped higher on the open and extended gains, but filled the gap area. As long as futures remain in the uptrend established from the late-January low, the near-term technical picture is positive. Yesterday's higher-high is still a positive sign as long as futures hold above uptrending support.

Cash hog expectations: Steady to weaker. The cash hog market is called to open steady to weaker as packers work to get and keep margins in the black after being in the red for an extended period of time. This week's supplies are largely booked, which will limit the possibility of firmer bids the remainder of the week.

Futures call: Mixed. Futures are called to open mixed after yesterday's strong gains amid profit-taking as traders reevaluate positions. April lean hogs gapped above downtrending resistance drawn off January reaction highs. Consecutive closes above this downtrend would signal a potential near-term low being posted. Futures finished mid-range, which suggests the possibility for choppy trade this morning.

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