What Traders are Talking About:
Overnight highlights: As of 6:00 a.m. CT, corn futures are trading around 2 cents lower, soybeans are fractionally to 1 cent lower and wheat futures are 1 to 4 cents lower with SRW contracts leading declines. The profit-taking following yesterday's gains is expected to continue into the daytime hours. Live cattle futures are expected to open with a weaker tone, while hog futures are expected to be mostly firmer this morning.
* Meal breaks out. Much of the attention in the soy complex is on soybeans, and rightfully so. After testing key support last week, old-crop soybean futures have rallied sharply. But the technical pattern in old-crop soybeans remains choppy and bulls still have a lot of work to do if there's going to be a breakout on the daily charts. March soybean meal futures, however, posted an upside breakout from the choppy trading range yesterday in scoring new contract highs. Strong demand for meal along with issues getting enough supplies to crushing facilities are fundamentally price-supportive for meal futures. But near-term technical price action will determine if yesterday's breakout was the start of a fresh push higher or will turn into a bull trap.
The long and short of it: Meal futures have been the leader in the soy complex and will very likely continue to set the price tone. While soybean export demand is expected to wane seasonally soon, issues in Argentina could keep demand for U.S. meal strong longer than many expected.
* Wheat: Corrective bounce or working on a low? Wheat futures posted strong gains Tuesday, with winter wheat contracts leading the way amid increased winterkill concerns. Those concerns were fueled by the drop in winter wheat crop condition ratings I highlighted yesterday. How concerned traders are with the deteriorating crop conditions will show up in price action the next couple days. Followthrough buying would suggest concerns are building. A lack of followthrough, however, would signal traders used the deteriorating crop conditions as a reason to cover some short positions following the extended price slide.
The long and short of it: While yesterday's strong gains were encouraging for bulls, who have been desperately searching for signs of a market low, wheat futures have yet to retrace even 25% of the fall/winter price plunge. Bulls still have a lot of work to do to signal the move higher is more than a temporary corrective bounce.
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