Grain and soy markets are range trading

The grain and soy markets are range trading. Nearby corn futures seem to be consolidating their January rally culminating in last Friday’s seemingly decisive push above pivotal 40-day moving average resistance. Little fresh fundamental news has emerged, with South American weather appearing to exert some downward pressure, whereas South African drought is reducing export competition from that country. March futures tested and bounced from their 40-day MA yesterday and again overnight, thereby implying substantial underlying support. March corn futures skidded 0.25 cent to $3.695 /bushel Monday night, while May inched 0.75 lower to $3.74.             

Strong export data supported soybean futures on Monday. Technical buying in the soymeal market supported soybeans as traders found bargains after Friday’s dip in meal prices. Recent dips in meal prices have pushed prices low enough to become competitive to South American offers. The potential of renewed demand has traders supporting current price levels. Production concerns in Argentina on dry weather is further fueling today’s upward price movement. Soyoil on the other hand fell on weakness in the crude oil market. Strength in the soy complex as a whole kept oil from additional weakness. Soybean weekly export inspections for last week were 44.0 million bushels vs 51.4 million last week and 56.8 million last year for the same time period. Accumulated inspections for the current marketing year is 1.16 billion bushels down 12% vs USDA’s projected decline of only 8%. March soybean futures gained 4 cents to $8.80 ½ Monday, while Mar soyoil fell 6 points to 30.44  cents per pound and March meal surged $4.00 to $272.50.                

Wheat futures climbed to one week highs on short covering. An uptick in prices fueled by concerns out of Russia potentially limiting exports triggered fund short covering. Funds large bearish bets will subject the market to short cover rallies as bullish data pushes funds to exit their net short positions. Last Friday, the Russian Agriculture Ministry met and is considering tougher limits on exports till the new crop comes to market. Just the opposite, the market has been expecting Russia to eliminate or ease export taxes. The change in the export stance has pushed prices higher. Despite the rise in the floating export tax, Russia’s December exports hit a record high, due to the weaker rouble. Wheat weekly export inspections for last week were 6.9 million bushels vs 12.5 million last week and 11.7 million last year for the same time period. Accumulated inspections for the current marketing year is 480.7 million bushels down 11% vs USDA’s projected decline of only 6%. March CBOT wheat climbed 6 cents to $4.81 ½ per bushel on Monday trading, and March KC wheat advanced 3 ¼ cents to $4.74, while March MWE rose 2 ¾ cents to $4.99 ¾.

Live cattle closed down Monday, giving back Friday’s gains. Lower US equity markets and Friday’s slightly bearish cattle report pressured futures lower. Falling packer margins have weakened the cash market. US Beef packer margins have steadily dropped since last week. Average packer margin for Monday is +$69.30 per head, down from +$70.75 on Friday and +$115.70 a week ago. US wholesale beef cuts dropped Monday. Choice cuts dropped 0.87 to $223.96 per cwt, while Select cuts fell 1.12 to $219.56. Feeder cattle cash markets gained strength up $3 to $6 per cwt lending support to the February futures contract, while weakness in the live cattle market pressured the deferred month trading. USDA reported cattle on feed as of January 1 at 10.57 million head, 100% of last  year’s 10.63 million head. However, December feedlot placements exceeded expectations, which is expected to weigh upon today’s opening. February live cattle slipped 0.65 cents to 131.425 cents/pound on Monday’s close, while April futures dropped 0.85 cents to 132.225. March feeder cattle fell 0.13 cents to 157.775 cents/pound and April feeders dropped 0.50 cents to 157.325.

Early trading pressure stemming from hog premiums to exchange’s hog index was kept in check as traders anticipate fewer pigs this spring. Last week’s lighter weights lead traders to believe that producers are staying on schedule for bringing hogs to market. Cash prices are still firm even with Monday’s dip. Packer margins remain high and USDA’s quarterly hog reports remain supportive to cash prices. US pork packer margins from Monday are +$34.10 per head, up from +$32.25 on Friday. Country hogs are down 0.56 from Friday to $55.77. February hog futures closed 0.52 cents/pound higher at 63.525 cents/pound Monday, while April hogs slipped 0.22 cents to 68.775 cents/pound.               

Crude oil declines and uncertainties around China’s plan for its large cotton stockpile pressured cotton’s futures. Lack of supportive fundamental news sent the front month contract to the largest decline in six weeks. Certificated deliverable cotton stocks as of Jan 25 fell 5% from the previous session to 58,627 480 lb bales. The Relative Strength Index fell, after gaining some ground last week, to 42.337. A number close to 30 indicates an oversold market. March cotton dove 0.85 cents to 61.60 cents/pound on Monday’s close, while May cotton tumbled 0.73 to 62.10 cents/pound.