Market Snapshot, 10:00 a.m. CT -- Advice -- (VIP) -- June 21, 2013

June 21, 2013 05:04 AM
 

HOG PRODUCERS: HEDGE 25% OF 2ND-HALF PRODUCTION... Following a very strong rally from the early spring lows, hog futures are signaling a top is in the works. With seasonal patterns also pointing to a top soon, we advise hog producers to hedge 25% of expected 3rd-qtr. production in August lean hog futures and 25% of expected 4th-qtr. production in December lean hogs. Be prepared to increase hedge coverage if futures confirm a market top.

Corn futures have firmed amid some bull spread unwinding to trade 1 to 6 cents lower in nearbys with new-crop now mostly 1 to 2 cents higher.

  • Traders are evening positions ahead of the weekend and Monday's Crop Condition update.
  • Rains are again moving into the upper Midwest, and while growers are less than enthused, the market views this as favorable after the recent warm spell.
  • Another 2 to 4 inches of rain are expected for the region over the next five days which is expected to be followed by above-average temps for much of the Corn Belt over the 6- to 10-day outlook. Traders see this as "ideal" weather.
  • A 1- to 2-cent slide in Gulf basis for near-term delivery reminds of slow export demand.

 

Soybean futures are around a penny lower in old-crop futures, with new-crop down 5 to 9 cents.

  • A quiet news day for the soybean market is leaving traders to engage in some bull spreading ahead of the weekend.
  • Old-crop supplies are tight, which continues to limit selling interest in the market and keep basis levels at historically high levels. But this is factored into prices.
  • And near-term concerns have about soybean planting have eased as farmers took advantage of the recent warm, dry spell to get most remaining bean acres planted. USDA will provide an update on this Monday.
  • Strength in the dollar index this week and today is adding light pressure as it makes U.S. soy products less competitive. News a South Korean feedmiller bought 55,000 MT of Argentine soymeal is a reminder of this.

 

Wheat futures are marginally to a penny lower in Chicago, mixed in Kansas City and fractionally to a penny higher in Minneapolis contracts.

  • Chicago wheat futures are in negative territory thanks to spillover from corn and strength in the greenback.
  • Other contracts are enjoying light short-covering thanks to crop concerns.
  • Kansas City is benefiting from varied harvest results in HRW wheat country with harvest moving into southern Kansas. Hedge pressure associated with harvest is also limiting buying interest to short-covering, however.
  • Uncertainty exists as to how much of the spring wheat crop was planted this week after consecutive dry days. USDA will provide an update on this Monday.
  • News India's cabinet approved the sale of 10 MMT of wheat from government stocks into the domestic market is also limiting buying interest.
  • The same can be said for news Russia raised its grain production forecast by 2 MMT to 95 MMT, including 54 MMT in wheat production.

 

Live cattle futures opened mixed, but they have improved to post slight to moderate gains. Feeder cattle futures opened under pressure, but have since improved to slightly higher trade.

  • Traders are cautiously evening positions as they await the release of the Cattle on Feed Report and the start of cash cattle trade.
  • The report is expected to show all categories below year-ago, with Placements expected to set the tone of the report. There is a wide pre-report trade guess for this category ranging from 84.3% to 99.8% of year-ago levels, signaling this will be the wildcard.
  • So far, just light cash cattle sales have taken place in Nebraska and Iowa at $121 to $122, steady with week ago. Most expect active trade to take place at steady to lower prices compared to $120 on the Southern Plains last week as Choice boxed beef values have fallen this week and showlists are heavier.
  • Yesterday, however, Choice boxed beef cuts firmed 32 cents and Select firmed $1.19. Movement was relatively light at 149 loads. But with Choice boxed beef cuts now below $200 per cwt. (at $199.30), the market feels traders may be more willing to stick with beef over cheaper alternatives.

 

Lean hog futures are moderately lower this morning.

  • Traders are taking advantage of strong weekly gains in futures and the recent run-up in the U.S. dollar index to book profits today. The market is also watching for a market top.
  • Traders are also unwilling to be caught long ahead of today's USDA's Cold Storage Report, which is expected to show record-large frozen pork stocks for the end of May.
  • Adding light pressure is the 86-cent slide in the pork market yesterday on light movement of 233.3 loads.
  • Packers have trimmed kill hours in an effort to keep margins in the black amid tightening supplies. This has kept bids steady to higher most of the week. But today, bids are mostly steady with a few lower bids as most are well supplied for near-term needs.
  • But selling pressure in the July contract is being limited by the nearly $5 discount it holds to the cash hog index.
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