Watching Outside Markets, Still

November 16, 2008 06:00 PM

Julianne Johnston Pro Farmer Senior Markets Editor

From Pro Farmer

Updated as of 7:00 a.m. CT

Lower start expected... The grain markets saw light pressure in overnight trade (although corn saw mixed trade) due to weakness in the crude oil market and stock futures signaling additional pressure is ahead today for the stock market.

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

Corn: Mixed. Futures were narrowly mixed overnight. Futures posted mild corrective gains Friday to finish slightly higher for the week. Earlier in the week, futures dropped below support at the October lows this week, but failed to close below that level. As a result, that spike of support could turn into a bear trap -- if followthrough buying is seen in corn futures this week.

Soybeans: 4 to 9 cents lower. Futures were weaker overnight, with nearbys mostly 4 to 5 cents lower. January soybeans closed last week about 26 cents below the previous week's close. Futures were supported by short-covering to close out the week, with dollar weakness providing much of the support. But while the dollar softened Friday, its chart pattern is still bullish. How outside markets perform will largely drive grain market action this week.

Wheat: 1 to 6 cents lower. Futures were slightly lower overnight on spillover from neighboring pits. March Chicago closed last week about 33 cents above the previous week's close to return to the upper portion of the month-long consolidation range. If futures fail to find buyers near the top of the range, it will signal the correction has been exhausted.

Cash cattle expectations: Watching beef trade. Feedlots actively moved cash cattle at $1 lower prices around $93 in the Plains last Friday afternoon. The disappointing cash cattle trade threatens to keep cattle futures under pressure to start the week even though futures are trading at a discount to the cash market. In turn, pressure on cattle futures would point cash cattle prices lower again this week.

Futures call: weaker. Futures are called to open weaker on expectations for selling in the stock market. Futures faced late-session selling pressure on Friday to finish on or near session lows. For the week, live cattle futures posted sharp losses. The disappointing cash trade may put additional pressure on cattle futures this morning, although futures are already at a big discount to the cash market.

Cash hog expectations: Mostly steady. Cash hog bids are expected to open the week steady at most Midwest locations, although some firmer bids are also anticipated. Despite plentiful market-ready supplies, most packers are in need of early week slaughter needs and are working with profitable margins. As slaughter runs fill up, however, cash hog bids could soften later in the week.

Futures call: Mixed. Futures are called mixed amid spreading. Futures have returned to test downtrending resistance, but with nearby contracts trading at a premium to the cash index, surpassing that level next week seems unlikely --  or at least short-lived.

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