Resurfacing of Euro-Zone Worries Pressure Grain Futures

May 9, 2012 01:19 AM

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Overnight highlights. Following are highlights of overnight trade:

Corn: 1 to 2 cents lower. Futures were mostly 1 to 2 cents lower overnight, with the exception of May, which was firmer amid ongoing Gulf basis improvement. Continued strength in the U.S. dollar index weighed on crude oil and gold overnight, signaling another "risk-off" day of trade is ahead due to the political uncertainties in the euro-zone. Meanwhile, traders will be putting their finishing touches on positions ahead of tomorrow morning's USDA Supply & Demand Report, which is expected to show tightening old-crop stocks, while a big recovery is anticipated for carryover in the year ahead.

Soybeans: 6 to 12 cents lower. Futures softened in the face of positive demand news yesterday, a sign the market need another source of fresh news to keep bulls interested. July beans have completed a 25% retracement of the rally from the January low and has violated uptrending support to suggest a near-term high has been posted. The important test will be if the market has respect support at the April low of $14.09 1/2. Meanwhile, ultimate downside risk should be limited as traders expect USDA to tighten old-crop carryover in tomorrow's report and show prospects for continued tight stocks in the year ahead.

Wheat: 3 to 6 cents lower. Futures were pressured by spillover from neighboring pits and negative outside markets overnight. July Chicago wheat is marking time in a choppy consolidation range above last week's contract low of $5.99 1/2. Violation of this support would open more downside risk. Concerns about the fate of the euro-zone have strengthened the U.S. dollar index and investors will be watching to see if any key developments come from the European Parliament meeting, which will assess its future given recent changes in French and Greek leadership.

Live cattle: Mixed. Futures are expected to be mixed this morning, with upside potential limited to short-covering given expected weakness in the U.S. stock market this morning. Traders say cash signals are mixed this week, with beef prices firming yesterday but movement lackluster and this week's cattle showlist higher than last week. Cash cattle trade isn't expected until later in the week given the wide spread between asking prices and bids.

Lean Hogs: Mixed. Futures are expected to see a mixed start this morning, with traders cautiously optimistic the pork market is working on a near-term low. Pork values firmed 42 cents yesterday on very strong movement of 131.75 loads. Packers' profit margins are back near breakeven, but pork values need to continue to strengthen in order to improve demand for cash supplies.


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