Johnston Pro Farmer Senior Markets Editor
as of 7:00 a.m. CT
Choppy trend in grain
markets... It's been pretty easy to talk out of both sides of your
mouth when discussing what the likely near-term trend of the corn and soybean
markets could be. So today when I was asked, "Well, you've given a bullish
and bearish argument, which one do you believe in 'more' for the near-term?"
I answered, "Actually, both. This market is stuck in a choppy sideways trend
until proven otherwise."
Grain traders are keeping a close
eye on the outside markets. Crude oil has strengthened this week, which is limiting
downside risk in the grain markets, but if Gulf oil rigs are able to avoid significant
damage from "Gustav," crude oil will be lower next week. But at the
same time, if the storm's path remains on target to do some damage, it could support
the current risk premium.
Traders are also watching weather,
which was bearish yesterday. Rains in the western Corn Belt were beneficial
-- where they fell -- but the storm fizzled out before it reached eastern Iowa.
Rains are still needed in many areas.
But until the grain
market becomes more confident about crop size, the trend will be choppy. Pushing
through resistance at last week's highs would be a bullish technical signal.
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Opening calls. These calls originate
more than three hours before the open -- use caution, things change::
Corn: 1 to 2 cents lower. Futures were slightly lower overnight. Futures
saw a choppy day of trade yesterday, but closed slightly higher on support from
outside markets. Traders are also keeping an eye on the weather, with rains in
the western Corn Belt yesterday limiting upside potential.
Mixed. Futures were mixed overnight, although favoring a weaker tone. Futures
were mixed yesterday, with nearbys ending firming on spillover from outside markets.
Key near-term resistance for November soybeans is at last week's high of $13.70.
A push above that level would likely trigger buy stops and could push the contract
above the 40-day Moving Average, which is currently around $13.89 to uncover more
speculative buyer interest.
Wheat: Mixed. Futures were
mixed overnight, although favoring a firmer tone. Futures closed sharply lower
yesterday, pressured by favorable weather in areas like Argentina and Australia,
as well as a lack of fresh demand news. December Chicago wheat posted a bearish
reversal after poking above Tuesday's high, but failing to fill yesterday's gap
on the daily chart.
cattle expectations: Watching beef trade. After solid strength early
this week, boxed beef prices were 98 cents to $1.06 lower Wednesday. If beef prices
weaken further, cash cattle expectations will soften, especially given pressure
on cattle futures this week. Most likely, cash cattle prices will come in steady
to lower in the Plains.
Futures call: Mixed. Futures
are called mixed on the possibility of short-covering following yesterday's decline,
but could see additional pressure since there was technical damage done to the
charts. Traders are also concerned about post-Labor Day beef demand, especially
with pork cutout values under pressure.
hog expectations: $1 to $2 lower. The pork cutout value was down another
$2.05 Wednesday. That will keep cash hog bids under pressure across the Midwest
today. Hog traders are concerned the sharp drop in product values signals export
demand is waning.
Futures call: Weaker. Futures closed
limit lower yesterday in all but the extreme far-deferred contracts, which were
near limit lower. Futures gapped sharply lower on the open and extended losses
throughout the session until the daily trading limit was hit. A combination of
technical and fundamental factors contributed to the sharp price pressure. With
the limit-down close, the market is susceptible to followthrough selling pressure
this morning, but could also see short-covering on ideas losses were overdone.