Market Snapshot, 10:00 a.m. CT -- (Advice) -- March 19, 2014

March 19, 2014 04:57 AM

Build price floor with lean hog put options… We have stayed out of coverage in lean hog futures to allow the parabolic run in the market to play out as much as possible without racking up unnecessary costs of continuously rolling put option coverage higher, but we can't wait any longer to build a price floor. Hog producers are advised to cover 50% of expected second-quarter hog marketings and 50% of expected third-quarter hog marketings by buying $126.00 June lean hog put options. Don't wait on this coverage, buy the puts "at the market."

Corn futures have improved to trade 1 to 2 cents higher this morning.

  • Corn futures saw some mild profit-taking pressure overnight, but traders have since shifted to the buy side thanks to ongoing uncertainty regarding Ukraine grain exports as well as spillover support from soybeans.
  • Even if grain shipments out of Ukraine are not impacted by political tensions, a depreciating currency and tighter credit lines are expected to reduce country's 2014 acreage.
  • Traders are also hesitant to add long positions ahead of Thursday's Weekly Export Sales Report, as recent data has signaled strong demand.
  • Gulf basis slid a penny for April and May delivery this morning, reflecting improved river transportation and lower freight costs.
  • Lanworth today pegged world 2013-14 corn production at 967 MMT, which is in line with USDA's latest projection.
  • The market is also showing a bit of concern about ongoing cold weather and more snow for the Corn Belt. Soils have had little chance to start thawing after a brutal winter.

Soybean futures are 14 to 15 cents higher through the July contract, while deferred months are 3 to 7 cents higher.

  • Nearby soybean futures are again benefiting from bull spreading activity. July soybeans moved through the key $14.00 resistance today.
  • Old-crop futures have been lifted by tight ending stocks and reminders of strong export and domestic demand. Buying in new-crop beans has been less enthusiastic due to ideas soybean production will rebound in 2014.
  • Meanwhile, crop estimates out of Brazil continue to trend lower and the nation is still dealing with shipping delays.
  • Today Lanworth pegged 2013-14 world soybean production at 288 MMT, which is 2 MMT above USDA's latest estimate.

After a setback overnight, wheat futures have renewed their rally. SRW wheat futures are 8 to 10 cents higher. HRW and HRS wheat is around 12 to 15 cents higher.

  • Wheat futures saw mild profit-taking overnight as traders took advantage of yesterday's strong gains, but this has since given way to bargain buying and a renewal of the uptrend.
  • The wheat market continues to benefit from expectations tensions in the Black Sea will shift some business to the U.S. The situation is also expected to reduce 2014 crop sowings.
  • Dust storms on the Southern Plains keep drought concerns in mind. The condition of the winter wheat crop deteriorated substantially last week, based on state updates.
  • Lanworth today said the 2013-14 world wheat crop would total 710 MMT, which is 3 MMT below USDA's crop peg.
  • Gulf HRW wheat basis firmed 8 cents for immediate delivery and 2 cents for April, possibly pointing to improved demand. Gulf SRW wheat basis is mostly steady.

Live and feeder cattle futures are posting slight losses this morning.

  • Traders are engaging in some mild profit-taking as they wait for cash cattle trade to get underway. They have shown little urgency to narrow discount futures hold to last week's cash cattle trade at $148 on the Southern Plains and $150 to $152 in Nebraska.
  • This signals traders believe a top in the market is near or in place.
  • Asking prices in Texas stand at $151 to $152 as feedlots feel tighter showlist numbers and record-high beef prices justify higher trade.
  • Meanwhile, the product market continued its climb yesterday. Choice boxed beef values firmed $1.23 and Select rose $1.16. Movement improved to 100 loads, though this is still relatively light.
  • Traders are also beginning to look ahead to Friday's Cattle on Feed Report. Pre-report expectations are for On Feed to come in at 98.9%, Placements of 109.7% and Marketings at 97.0% of year-ago levels.
  • Firmer corn prices are adding profit-taking incentive for traders of feeder cattle futures.

April lean hogs are slightly lower while May and June futures are posting sharp losses. Far deferred months are moderately to sharply higher.

  • Lean hog futures are widely mixed today. The red-hot rally in the lean hog market gives traders plenty incentive to book profits in the nearbys, as does strength in the U.S. dollar index.
  • Plus, nearby contracts have been technically overbought according the Relative Strength Index for quite some time, indicating a correction is overdue.
  • In addition, the April contract remains at more than an $8 premium to the cash index. While cash prices have risen substantially in recent weeks, so have futures.
  • But considering other pullbacks in the hog market led to heavy value buying, traders remain cautious toward the short side of the market.
  • A $3.55 surge in the pork cutout value yesterday to yet another record along with a mild uptick in movement favors market bulls. The same can be said for steady to higher cash hog bids today.
  • And of course, the impact of the porcine epidemic diarrhea virus (PEDV) remains a major source of underlying support.
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