Shortened Holiday Week Ahead

November 23, 2008 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Shortened holiday week ahead... If tradition holds, this week's price activity should be lighter (but potentially more volatile), as trading volume thins around Thanksgiving. Typically, trade volume in all the markets wanes between Thanksgiving and the New Year, but this has been anything but a "normal" year. Given the high level of economic uncertainty, traders could decide to just "pull out" of the market and return the first of the year, which could result in a wave of price volatility.

For the meantime, outside markets will continue to be the driving force in the grain and livestock markets, meaning daily price moves won't necessarily reflect daily changes in fundamentals. Through the holidays, we could be in store for wild price swings as volume fluctuates.

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

Corn: 8 to 9 cents higher. Futures were mostly around 9 cents higher overnight. Futures posted a downside breakout from the consolidation range last week, with March corn declining 42 3/4 cents from the previous week's close. The worsening technical picture opens the door for even more downside risk next week, especially as economic uncertainties abound.

Soybeans: 19 to 21 cents higher. Futures were higher overnight in corrective trade. Futures posted sharp price losses last week, with contracts either violated support at the bottom of the month-long trading range or are leaning heavily on that support. With futures threatening a downside breakout from the consolidation range, price action early this week is key to near-term direction.

Wheat: 9 to 10 cents higher. Futures were mostly 10 cents higher overnight. Wheat futures posted sharp losses overall last week. Fundamentals are bearish as world supplies are the rise and U.S. wheat is struggling to be consistently competitive on the world market amid a rising dollar. Throw in global economic concerns, and wheat will continue to struggle to gain traction. Aside from short-covering, the upside is limited for the wheat market. 

Cash cattle expectations: Watching beef market, futures. There is some hope the cash market could stabilize this week as packers work to get the week's needs secured early due to the shortened kill schedule Thanksgiving week brings. But unless futures stabilize, there is more downside risk for cash this week.

Futures call: Firmer. Last week, December cattle closed more than $5 below the previous week's level, while the cash market dropped $6 to trade at $87 in the Southern Plains. Futures are called to open firmer based on Friday's bullish Cattle on Feed Report, although most of the support is expected to go to deferred contracts due to the tighter-than-expected Placements figure. The Marketings figure signaled producers are doing a very good job of keeping lots current.

Cash hog expectations: Steady to mixed. The cash hog market is called to start the week mostly steady, with some mixed tones depending on demand. Given the shortened kill week schedule, there will possibly be some locations bidding up for supplies, although hog supplies are thought to be plentiful for the week.

Futures call: Firmer. For the week, hog futures posted solid corrective gains last week. There was increased talk this week that the heaviest of the hog numbers has been worked through the market. While that should be the case, it will be hard to generate sustained upside momentum as the overall fundamental picture remains bearish, especially given global recession concerns. As a result, the upside is limited to corrective buying unless the late-October reaction highs are violated to signal an extended bounce is underway.

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