Thursday, July 05, 2007
888-452-8751
Fundamentals:
CBOT Dec corn opened 6 ¼ cents per bushel higher Thursday following a solid overnight session and in line with the robust wheat market. Drier than anticipated weather across the Midwest over the July Fourth holiday, and a reduction in rainfall estimates in the 6-10 day outlook models, offered support to prices by renewing worries about the corn crop being denied adequate rainfall during the moisture intensive pollination stage. However, soil moisture levels remain generally adequate for now, so the trade will not become too concerned about dryness until the forecasts call for longer hot and dry spells across key growing areas. Nevertheless, the absence of imminent rains, coupled with the strong tone of the wheat market was enough to keep corn prices well propped up Thursday, and more firmness is expected Friday if rains remain rare for the coming few days. In addition to the weather, the trade overnight and Friday will be looking to the (delayed) weekly export sales report for directional guidance. Analyst estimates are running from 700,000 to 1.05 million metric tons for the sales total, versus just under 1 million tons last week. From a technical or chart perspective, the corn market is due for a period of consolidation and potentially a recovery drive following the steep, steady decline from the mid-June highs above $4.30 a bushel basis the Dec contract. Whether or not such steadiness or strength takes place will depend greatly on the weather and the tone of Friday's sales report, which if bullish could certainly lend the market increased support going into the weekend. Looking forward, weather forecasts will remain the main drivers of this market, and as long as a majority of the crop is denied regular rains over the coming weeks, corn prices will likely remain fairly well support. That said, if decent rains do fall, further downward price probes are inevitable.
Technicals:
No comments today.
Recommendations:
NONE
Speculative:
Hedge Positions:
3-9-07: Bought December $4.00 Puts / Sold December $5.60 Calls @ ~$.25
Soybeans:
Fundamental:
Soybean futures were a bit choppy during the course of Thursday's trade, although strength in the neighboring wheat and corn markets lent enough buying interest to keep soybean values supported throughout and close with just over 4 cent gains, basis the November contract. News wise it was very slow in general, and the soybean market's early sell-off and continued pullbacks to unchanged levels showed the trade had a lack of buying interest, or was at least willing to take some profits at higher levels. There remains a glut of cash supplies available in the US and around the globe, which was marked by rather large soybean deliveries against the July contract again, although this hasn't had much of an impact on prices. Recent market action has largely been the result of longer-term production prospects that looks to see both domestic and global balance sheets tighten up considerably over the coming year, especially after the USDA has revealed that US acreage prospects are down sharply by over 11.0 million acres year-on-year. That said, the market has done a fairly decent job of pricing in lower than expected supplies down the road, and is now left looking for direction at these high price levels. It is a bit too early to make assumptions on yields as we have yet to enter the all-important month of August where the soybeans undertake their important development stage of pod-fill. However weather forecasts do need to be kept track of, as the crop will need regular rain events to ensure adequate moisture supplies if the US crop is to see optimal yield potential. Furthermore, another unknown factor for the market is how many acres South America will be able to pick up, and potentially ease the stress that a short US soybean crop will put on global balance sheets. And of course, one way of ensuring a pick up in South American acreage is to keep the global price of soybeans high in an effort to offset rising input costs and encourage production expansion by producers in that region. Looking ahead the market is searching for fresh insights before deciding on a more definitive direction to take prices in for the near to- medium term. And until the USDA gives us some fresh data or weather forecasts become decidedly bullish or bearish, we may be in for a slower sideways grind as the trade attempts to get a handle on the future of supply prospects.
Technicals:
No comments today.
Recommendations:
NONE
Speculative:
NONE
Hedge Positions:
3-9-07: Bought November Soybean $7.80 Put / Sold November $10.40 Call @ ~$.35
Wheat:
Fundamental:
The wheat market saw some fresh buying interest help the market close with solid double-digit gains Thursday, with nearby September futures settling up 21 cents on the day. The same story of concerns surrounding the availability of global supplies, after damage to several exporting nations' crops, has global end users scurrying to secure supply needs and that brought a slew of export activity with it, giving the market its initial upward momentum Thursday morning. We saw Egypt opt for 175,000 tons of US and Russian supplies, while South Korea purchased 34,000 tons of US wheat. Also seeking supplies was Jordan, looking for 100,000 tons of optional origin wheat, and the CCC for 10,000 tons of wheat for donation to Haiti. Further spurring thoughts of fair demand was the lack of deliveries against the July contract, as only 20 deliveries were issued, although it was noted that there was a lack of commercial interest. Other news was light, but looking to the weather it seems as though we could see more harvest delays across the US Plains growing regions, which further brings into question crop quality with soggy fields leaving the crop susceptible to disease and overall quality declines. Today's action seemed to be about recovering from the slide off life-of-contract highs as this morning's news still indicates solid demand for wheat by global consumers. That said, the market did break over 65 cents from its contract highs made last Friday, so there was likely some short covering that added to Thursday's price strength. Looking ahead, its very difficult to judge where prices head from here, as we need to get a few more insights as to what actual US and global production prospects will be before the global community can be at ease with current supply levels. In the meantime, we must allow for wilder price movements as any further thoughts tightening balance sheets will send prices higher in an attempt to encourage greater global production.
Technicals:
No comments today.
Recommendations:
NONE
Speculative:
NONE
BEEF...Technical buying sent live cattle futures higher today, posting a fairly strong close. The action gives further credence to the idea of a summer low having been established. There has been no cash trade yet this week. The market is still being fueled by last week's 3 cent move off the NE lows. The beef was quoted down .44 at noon but on good box movement. Today's kill came in at 124,000, toward the low end of estimates. Feeders closed higher despite the higher close in corn futures.
PORK...Limited supplies of butcher hogs met with limited demand. The cash was mixed to lower but futures managed to close higher for the second consecutive session, edging upward against the current down trend. The Tuesday out-of-town report indicated good seasonal bacon demand and belly futures, after selling off hard on the heels of the hog and pig report soared to limit up gains. The improving tone in the belly primal could help shore up the pork cutout value in the near term. Lean hog futures closed higher but once again drifted off session highs. Friday will mark the third day up again the down trend.
Positions:
NONE
Recommendations:
NONE
