Seasonal Pressure Makes It Harder For Bulls

September 23, 2013 01:04 AM
 

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 mixed with the November contract fractionally lower and wheat futures are fractionally to 1 cent higher. Unless market-moving news surfaces, light and choppy trade is likely through the day session. Cattle futures are expected to trade firmer this morning on support from last Friday's Cattle on Feed Report, while hogs are called steady to lower.

 

* Corn, beans fighting seasonal pressure. Harvest is in full swing in the South and the early stages are underway across the Midwest. Therefore, basis is softening and futures are facing seasonal selling pressure. Funds are already heavily short corn, so there isn't a lot of risk of them aggressively extending their short position in that market. But with funds long soybeans, liquidation pressure is real threat in that market, especially after Nov. soybean futures filled the Aug. 26 gap last week and finished near weekly lows, swinging the technical momentum to bears.

The long and short of it: With seasonal pressure building, bulls' will find it harder to gain traction.

* Chinese wheat import forecast revised up. China is now expected to import 7.5 MMT of wheat in 2013-14 as unfavorable weather trimmed domestic production, according to China National Grains and Oils Information Center (CNGOIC). The state-run think-tank previously forecast Chinese 2013-14 wheat imports at 6.5 MMT. CNGOIC says China has already booked 3.7 MMT of wheat from the U.S., 2.2 MMT from Australia and 220,000 MT from France. USDA projects China will import 9.5 MMT of wheat in the 2013-14 marketing year.

The long and short of it: It's been known for a while that China needs wheat to cover domestic shortfalls. Still, the upward revision was mildly supportive for wheat overnight.

* Bullish Cattle on Feed Report. USDA's monthly Cattle on Feed Report showed all three categories on the friendly side of the average pre-report guesses. The combination of smaller-than-expected Placements and heavier-than-expected Marketings last month left the Sept. 1 feedlot supply slightly less than anticipated. Placements at 1.788 million head were the lowest for August in 17 years. In addition to the bullish Cattle on Feed data, cash cattle traded $1 higher in the Plains late Friday. That combination should support live cattle futures to open the week.

The long and short of it: After technical action hinted that a short-term low was posted last week, this report data and the firmer cash cattle trade should be enough to start the next rally attempt in live cattle futures.

 

Follow me on Twitter: @BGrete


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