Market Snapshot, 10:00 a.m. CT -- (Advice) -- January 9, 2014

January 9, 2014 04:10 AM


Crop producers: Advance 2013-crop corn sales, make initial 2014-crop corn and bean sales... Corn futures posted a downside breakout from the two-month consolidation range, signaling attitudes are becoming increasingly bearish. Ahead of tomorrow's USDA reports, hedgers are advised to make a 35% 2013-crop cash corn sale to get to 60% priced on old-crop in the cash market. Cash-only marketers are advised to make a 25% 2013-crop sale to get to 50% sold.

The technical picture and attitudes are also eroding for new-crop corn and soybean futures. Therefore, corn hedgers and cash-only marketers are advised to make a 20% cash forward contract sale on expected 2014-crop production for harvest delivery. Soybean hedgers and cash-only marketers are advised to make a 10% 2014-crop cash forward contract sale for harvest delivery.

Wheat producers: Advance 2013-crop cash sales, make initial 2014-crop sales... Wheat futures continue to fall amid plentiful global supplies and a weakening technical posture. With attitudes turning more bearish, we don't want to wait any longer to advance old-crop sales and to make initial new-crop sales. Wheat hedgers are advised to make the final 25% 2013-crop cash sale to get to 100% sold in the cash market on old-crop. Cash-only marketers are also advised to make a 25% 2013-crop sale to get to 75% priced on old-crop.

Wheat hedgers and cash-only marketers are advised to make a 35% cash forward contract sale on expected 2014-crop production for harvest delivery.

Corn futures have softened to post losses around 6 to 8 cents across the board.

  • Disappointing weekly export sales of 155,300 MT for 2013-14 this morning is weighing on the corn market. However, light sales over the holiday season are not unusual.
  • Also, the market was reminded of favorable conditions in Brazil. Conab has raised its peg of the Brazilian corn crop by 190,000 MT to 78.97 MMT.
  • Traders' focus is also on evening positions ahead of tomorrow's USDA reports. Traders look for USDA to raise the size of the 2013 crop to 14.053 million bu. and for 2013-14 carryover to rise to around 1.84 billion bushels.
  • Tomorrow's Grain Stocks Report could be the market-mover for the day, as traders expect the report to reflect near-record quarterly corn usage.
  • This set of reports have provided major surprises in the past, giving some incentive to move to the sidelines ahead of the reports.

Soybean futures are steady to 5 cents higher in 2014 contracts, with deferred months mixed.

  • Soybean futures have seen some bull spreading activity this morning as traders ready for a barrage of report data from USDA Friday.
  • Traders look for USDA to raise its production estimate slightly to 3.27 million bushels. They also expect carryover to be up nearly 1 million bu. from last month's 150-million-bu. projection.
  • Basis strength both at interior and Gulf locations is lifting nearby contracts. Gulf soybean basis is up 6 cents this morning for immediate delivery to reflect a surge in demand.
  • The national average soybean basis stands 21 cents over March futures, which is much stronger than the three-year average that shows basis 3 cents below futures at this time.
  • But this morning's weekly export sales of only 155,500 MT is limiting gains. This tally fell short of expectations and was a marketing-year low. However, strong exports in excess of 1.675 MMT somewhat offset this news.
  • Also this morning, USDA announced an 110,000-MT soybean sale for 2014-15 to China. So far this week the country has purchased 575,000 MT of U.S. beans.
  • Conab has raised its estimate of the Brazilian bean crop to a record 90.33 MMT -- up 300,000 MT from last month. However, Brazil's ag minister says the crop could "easily" exceed 95 MMT.

The wheat market has softened. SRW wheat is currently 5 to 7 cents lower while HRW is 3 to 5 cents lower and HRW is 1 to 2 cents lower.

  • SRW wheat futures are seeing followthrough selling after yesterday's downside breakout. The technical posture of the wheat complex gives bulls' little to be optimistic about.
  • This morning's weekly export sales data met expectations, but expectations were on the low side. Sales of 110,800 MT for 2013-14 were a marketing year low. Sales of 184,100 MT for 2014-15 were also reported.
  • Traders are also readying for USDA's winter wheat acreage report, which is expected to show all winter wheat plantings for 2014-15 around 43.7 million, up 600,000 acres from the previous season.
  • Meanwhile, traders look for USDA to raise its 2013-14 U.S. carryover peg by around 16 million bu. to 558.8 million bushels.

Live cattle futures are slightly higher through the August contract this morning, while deferred contracts are slightly lower. Feeder cattle futures posting slight to moderate gains.

  • Nearby futures are enjoying light buying interest thanks to expectations for at least steady cash cattle trade compared with last week's $137 action on the Southern Plains.
  • Asking prices of $139 are countered by bids at $135 in the South, signaling late-week trade is likely.
  • A few isolated sales took place in the Iowa dressed market at $220 yesterday, up $2 from the bulk of trade in the state the week prior.
  • Supporting these higher cash expectations are highly stressful weather early this week and continued below-normal temps. This is likely slowing cattle weight gain.
  • Showlist estimates are up in Nebraska and Colorado, but down slightly in Kansas and Texas.
  • Also, the boxed beef market has surged this week, including strong gains yesterday. Choice beef values surged $2.82 yesterday (to $210.13 per cwt.) and Select rose $3.51 (to $207.07 per cwt.). Even more important, movement picked up notably to 192 loads.
  • Product market gains have significantly improved packer profit margins this week, though they remain in the red.

Lean hog futures gapped lower on the open and are posting slight to moderate losses.

  • A decline in both the pork and cash markets yesterday is pressuring lean hog futures today. This resulted in the front-month gapping lower through key support levels this morning.
  • This could set the stage for increased technical sales as the February contract may be headed for a test of the summer lows. So far, the April contract has respected near-term levels of support.
  • The pork cutout value dipped $1.38 yesterday, but this did encourage strong movement of 573.7 loads. This has some on-watch for signs the product market is finally working on a seasonal low.
  • But the cash hog market has softened amid improved weather across the Corn Belt. However, travel-disrupting precip could move back into the region late this week.
  • Pressure on nearby contracts also stems from the steep premium they hold to the cash hog index.
  • Traders are paying little attention to a 21,100-MT surge in 2014 pork export sales the week ended Jan. 2. USDA also reported sales of 1,100 MT for the final days of 2013.
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