What Traders are Talking About:
Overnight highlights: As of 6:10 a.m. CT, corn futures are trading 2 to 3 cents lower, soybeans are 10 to 11 cents higher in old-crop contracts and around 4 cents higher in new-crop contracts, while wheat futures are mostly 1 to 3 cents lower. Cattle futures are mixed amid bull spreading, while hog futures are slightly weaker in electronic trade.
* Soybeans remain red-hot. March soybean futures pushed above resistance at the September high of $13.77 3/4 overnight to extend the sharp price rally. Bulls' next target is the contract high at $13.99 3/4. Brazil (and South America as a whole) is on the way to record production, but private production estimates are on the decline. And China hasn't aggressively canceled U.S. soybean purchases as there are some logistical concerns in Brazil. As a result, traders sense USDA will have to raise its export forecast even more and cut into what is already a tight old-crop ending stocks forecast.
The long and short of it: Bullish attitudes continue to fuel a strong soybean price rally, but that could change quickly as the new-crop outlook is drastically different.
* Mixed bag of weather in Brazil. Heavy rains fell across northern production areas of central Brazil over the week, temporarily halting harvest efforts and slowing soybean movement to ports and port activity. Meanwhile, lighter but beneficial rains and cooler temps are seen across southern Brazil. More rain is forecast for southern Brazil this week, while conditions should be drier in central Brazil. The rains and cooler temps are beneficial for southern production areas as much of that crop is filling, but they won't completely erase impacts from two months of very hot and dry conditions.
The long and short of it: Brazil is going to grow a record soybean crop this year, but it won't be as big as once thought. Much of the focus moving forward will be on how quickly the crop is harvested and moved to ports for export. The level of Chinese cancellations will give us the best gauge of how Brazil's export season is progressing.
* COF Report negative, not bearish. USDA's Cattle on Feed Report isn't bearish as it shows feedlot supplies continue to tighten compared to year-ago, the 17th straight month that's been the case. But with all three categories on the negative side of the average pre-report trade guesses, the report is bearish compared to expectations. The combination of much-heavier-than-expected Placements in January and slightly lighter-than-expected Marketings pushed the On Feed category above expectations. At 10,760 head, the Feb. 1 feedlot inventory is roughly 130,000 head more than anticipated. January calf placements not only topped the average pre-report estimate by a wide margin, but also came in nearly two percentage points above the top end of the guess range. Record fed cattle prices and cheaper feed costs gave cattle producers more incentive to move animals into the feedlot last month. With U.S. calf supplies very tight, the sharp increase over year-ago implies more calves moved into the U.S. from Canada and Mexico.
The long and short of it: The bulk of the price pressure from this report is likely to be felt in deferred live cattle futures as the Placements category was the most negative. Bull spreading should be seen as nearby contracts are supported by higher cash cattle prices and tight market-ready supplies.
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