CORN
The July corn closed positive yesterday and had some follow through buying overnight. The gains have not been impressive, but what has been impressive is the new record levels of the May/July corn spread and the surging basis levels across the country. We are being told on a daily basis by the cash market and the spread trade that July futures are too cheap, but for some reason we are still not seeing much buying enthusiasm in the futures market. I can't be bearish old crop when the spreads and the basis is acting this way, but I am disappointed in the price action. Analysts look for more bull spreading today.
WHEAT
The wheat is seeing some short covering action. The charts actually show some divergence in the technical indicators that suggest the July KW could climb back to the $6.50 area. However the fundamentals still suggest that rallies are a selling opportunity. Much of the whet in western Kansas is in severe need of more rain, but even without that production supplies will be plentiful and whet will essentially be a feed grain.
SOYBEANS
Bull spreading was active in the soybeans overnight. The market still seems to be in a corrective mode, but the break should be short lived due to the strong demand for both old and new crop soybeans. The shrinking production estimates in South America are also supportive since every bushel lost there will have to be made up for by the US.
LIVE CATTLE
Live Cattle futures closed sharply higher to limit up Thursday, reversing all of the damage from the BSE case of two weeks ago. Cash bids and asking prices were on the rise as well, with feedlots requiring better money than a week ago to trade inventory. We saw some light trade in the north at the $195 level, which would be solidly ahead of week ago trade. Asking prices in the south are near $122, with $195+ asked up north. Overnight futures trade is mixed, with June modestly higher and deferred contracts off a little.
FEEDER CATTLE
Feeder Cattle futures closed mostly limit higher on Thursday, with the lead May contract up only 2.65. New buyers and short covering were seen, as traders showed their support for the weekly beef export number and news that the calf of the BSE cow tested negative. August was leader to the upside on Thursday and remained that in the overnight trade, with gains of more than .50. Cash index levels have remained on the defensive, but should get a boost from the futures trade.
CRUDE OIL
June crude oil prices were sharply lower during the initial morning hours, falling to their lowest level since February 13th. It appears that growing concerns over the pace of economic recovery in the US has trimmed demand prospects for crude oil. While the demand side of the ledger has come under pressure in recent sessions, supplies continue to build. This week's EIA inventory data showed US crude oil stocks at their highest level since September 1990 and OPEC appears to be moving to pressure prices lower by boosting output. Recent data shows OPEC pumping a little more than 2.0 million barrels per day above their target. Probably the key element in this morning's trade will be the US Non-Farm Payroll report, which is expected to show an improvement in jobs added in April.
There is substantial risk of loss to futures and options trading. Past performance is not indicative of future results.
By Donna Hughes
Lone Star Portfolio Advisors, Inc. was founded by Donna Hughes. Donna began her career in the industry in 1978 after graduating High School as a member of the Chicago Mercantile Exchange’s Inspection and Delivery Department where she was responsible for scheduling and facilitating the USDA grading and delivery for various Exchange Commodities. After 1 ½ years, she was offered a position working with George Segal, a prominent hedger in the Pork Belly market. It was through this relationship that she was mentored and taught the hedging process by working with Mr. Segal as well as other leaders of the Pork Industry. In 2004, Donna moved to Texas where her skills in the industry were utilized to help individual and corporate producers with their Risk Management Goals. Her Daily Market Commentaries are heard on the AllAgNews.com Radio Network broadcasting throughout Texas. She also contributes to magazines and periodicals including PetroEvents and Ag Monthly.
Donna created Lone Star and implemented strategic relationships with Daniels Trading and R.J. O’Brien leveraging their services to enable Lone Star to Build Lasting Relationships Thru Information, Execution and Research.
