Will Correction Continue?

March 4, 2009 06:00 PM
 

Julianne Johnston Pro Farmer Senior Markets Editor


From Pro Farmer

Updated as of 7:00 a.m. CT

Commodity markets find short-covering... Commodity markets saw a strong boost yesterday from outside markets, as both crude oil futures and U.S. stock indices were firmer, while the dollar softened after trading higher initially. With strong support from outside markets, traders covered short positions and corrected oversold conditions. But key to building on yesterday's price gains will be if gains are extended in the U.S. stock indices and crude oil. Crude oil was weaker overnight and the dollar was firmer, resulting in renewed pressure in the grain markets.

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

Corn: 4 to 6 cents lower. Futures were pressured overnight by outside markets. Futures closed off session highs, but still finished 11 to mostly 13 cents higher on help from outside markets yesterday. May corn posted an upside day of trade on the charts and closed near session highs. Resistance lies at last week's high of $3.80 1/2. A close above that level would signal a near-term low has been posted, as it would violate downtrending resistance drawn off December and January highs.

Soybeans: 1 to 7 cents lower. Futures were weaker overnight on strength in the dollar and pressure in crude oil. Futures maintained strong double-digit gains yesterday, but closed near session lows. There is the potential for a not-well-defined inverted head-and-shoulders formation on the daily May soybean price chart -- if the contract works higher from current levels. If the contract violates Monday's low, it would make it unlikely the inverted head-and-shoulders formation would develop.

Wheat: 5 to 6 cents lower. Futures were weaker overnight on spillover from neighboring pits. Futures built gains into the close to finish sharply higher and on or near session highs yesterday. July Chicago wheat futures must get through downtrending resistance from the January highs to signal a short-term low has been posted. That trendline is still well above the market -- about 18 cents above yesterday's closing level.


Cash cattle expectations: $1 to $2 higher. Light cash cattle trade was reported in Nebraska late Wednesday afternoon at $1 to $2 higher prices than week-ago. That points to $83 to $84 prices in Kansas and Texas, although active trade in those states isn't likely until Friday. Continued strength in the boxed beef market was enough to trigger the initial higher cash bids.

Futures call: Mixed. Futures trimmed gains into the close, but still posted solid gains for the day. Live cattle closed 42 to 80 cents higher, with feeder cattle up 57 cents to $1.05. Cattle futures trimmed gains into yesterday's close, as April cattle are already trading at or above expected cash levels. Resistance lies at last week's high of $86.37 and support lies at the February low of $82.40. Futures need to close above downtrending resistance drawn off the November and January highs to signal a near-term low has been posted.

Cash hog expectations: Mostly steady to firmer. Despite slumping margins, packers are expected to offer steady to firmer prices across the Midwest today as most still have late-week needs to fill. If marketings are light, however, some packers may scale back Saturday kill plans as cutting margins are now well below breakeven.

Futures call: Mixed. Futures posted corrective gains yesterday, but finished well off session highs. April hogs closed $1.47 higher to lead gains. Futures will again be directed largely by outside markets, but improvement in the cash market is also supportive for futures. April lean hogs left a gap on the daily chart yesterday. The contract must get through the 40-day Moving Average (at $62.96) and the last reaction high at $64.05 to extend the bounce from the contract low.


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