Pro Farmer Senior Markets Editor
From Pro Farmer
Updated as of 7:00 a.m. CT
USDA provides markets with plenty of surprises...
Traders viewed yesterday's USDA reports as bearish for corn and soybeans, while
saying the wheat data was neutral. USDA provided both bullish and bearish data
for wheat, but signals carryover for the next marketing year could tighten as
winter wheat seedings estimate came in below expectations. Grain futures closed
sharply lower on the data, with corn limit lower. Additional pressure came from
strength in the dollar and weakness in crude oil. Following are additional report
Soybeans: USDA raised the size of the 2008 soybean crop more than expected
to 2.959 billion bu. and increased 2008-09 carryover by 20 million bu. to 225
million bushels. USDA also pegged Dec. 1 soybean stocks at 2.276 billion bu.,
which was higher than expected. The end result was a very negative price response
that leaves the market vulnerable to followthrough selling overnight. The bearish
report data shifted traders focus from South American weather conditions, which
are forecast to remain hot and dry this week, especially in Argentina. USDA
left their Brazilian production estimate unchanged at 59 MMT, but lowered Argentine
production 1 MMT to 49.5 MMT. USDA lowered their 2008-09 global carryover estimate
250,000 MT from last month to 53.94 MMT, which represents about 90% of a Brazilian
Corn: USDA raised the size of the 2008 crop more than expected to 12.101
billion bushels. The Grain Stocks Report showed corn stocks of 10.084 billion
bu., which was also above expectations and reflected a slower-than-expected
usage pace. As a result, USDA lowered usage figures in their Supply & Demand
Report, with carryover now estimated at 1.79 billion bushels. Traders now view
stocks as ample, especially given slumping demand, which reduces (for now) their
concern about 2009 acreage. USDA boosted global carryover 12.2 MMT from last
month to 136.03 MMT. With stocks estimates on the rise amid slumping world consumption,
there isn't a supply concern on the global front either.
Wheat: USDA delivered both bearish and bullish data. The Grain Stocks
Report showed Dec. 1 stocks at 1.422 billion bu., which was above expectations.
USDA also raised carryover 32 million bu. from last month to 655 million bu.,
which is more than double year-ago levels. However, USDA delivered a much-smaller-than-
expected winter wheat seedings estimate of 42.098 million acres, which is down
around 4 million acres from year-ago levels. As a result, traders will be paying
more attention to weather conditions in the Plains, as well as spring wheat
acreage prospects. USDA also raised global stocks around 1 MMT from last month
to 148.36 MMT. After very tight world supplies last year, there is no shortage
of wheat this year.
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Opening calls. These calls originate
more than three hours before the open -- use caution, things change:
Corn: 7 to 9 cents lower. Futures were weaker in overnight trade on
spillover from yesterday's losses. Futures posted limit losses (30 cents lower)
in all but extreme far-deferred contracts yesterday in reaction to USDA data
and outside markets. March corn futures stopped shy of the 40-day Moving Average
thanks to the daily trading limit. Violation of that support at $3.79 3/4
today and the mid-December reaction low at $3.70 1/4 would signal a short-term
top has been posted and leave the contract low at $3.05 1/2 as the next level
of strong support on the daily chart.
Soybeans: 2 to 4 cents higher. Futures saw light short-covering support
overnight. Futures closed sharply lower to down the full 70 cent daily limit
yesterday. Meal and soyoil also posted very sharp losses. Pressure came from
bearish USDA data and broad-based commodity selling. March soybean futures
closed right on the uptrend from the Dec. 5 low. Followthrough pressure Tuesday
would violate the uptrend, which could trigger a fresh wave of chart-based
Wheat: 1 to 2 cents lower. Futures saw light spillover pressure
in overnight trade. Futures closed near limit down at all three exchanges
on heavy spillover from neighboring pits and the commodity world in general
yesterday. March Chicago wheat futures violated uptrending support from the
Dec. 5 low. That leaves the 40-day Moving Average (at $5.57 1/4 Monday) as
key near-term support. A drop through that level would leave $5.18 and the
contract low at $4.71 as the only strong support on the daily chart.
Cash cattle expectations: Watching
beef market. Boxed beef prices were $1.71 (Select) to $2.12 (Choice) higher
Monday on movement of 261 loads. That's a good start for the beef market, but
the product market must continue to strengthen if packers are going to raise
cash cattle bids in the Plains. Cash sources expect showlist numbers to be slightly
larger than week-ago.
Futures call: Steady to weaker. Futures closed with slight losses
following a choppy day of trade yesterday. Live cattle futures showed a choppy
tone through much of the morning. But widespread weakness across the commodity
sector caused a slightly lower close as futures finished low-range in most
contracts. That opens the door to followthrough selling this morning.
Cash hog expectations: Steady to
firmer. Cash hog bids are expected to trade steady to higher across the
Midwest today as packers work to fill up slaughter runs. But snow-covered roads,
high winds and bitterly cold temps could slow hog movement in some areas and
cause packers to focus on improving razor-thin cutting margins.
Futures call: Weaker. Futures closed moderately to sharply lower yesterday,
which was in the lower end of the day's range for most contracts. Lean hog
futures were pressured by heavy selling in the commodity world, especially
the corn and meal markets. The big premium futures hold to the cash index
also weighed on futures. With the low-range close, futures are susceptible
to followthrough selling this morning.