HOG PRODUCERS: EXIT 3RD-QTR. HEDGE COVERAGE... August lean hog futures are firming as traders work to narrow the discount the contract holds to the cash market. As a result, it's time to step out of 3rd-qtr. hedge coverage. Hog producers are advised to exit the 50% 3rd-qtr. hedges held in August lean hog futures. After this push higher, we may look to rehedge a portion of 3rd-qtr. production in October lean hog futures.
Corn futures are posting double-digit losses this morning.
- Traders are brushing off a decline in USDA's corn crop condition ratings and confirmation of slow development yesterday.
- The market is more focused on the forecast for more precip and cooler temps in the Corn Belt this week. While rains are falling in the southwest Corn Belt, precip amounts in key production states like Iowa have been widely varied.
- The market is ignoring a daily corn sales announcement totaling 106,400 MT to Mexico. Of that total, 11,000 MT is for 2012-13 and 95,400 MT is for 2013-14.
- A 36-cent surge in Gulf basis for early August delivery signals importers are taking advantage of the price break to book needs.
- The December corn contract broke key support at $4.90 this morning, triggering sell stops and accelerating losses.
August soybean futures have plunged 30-plus cents lower, while deferred contracts are 5 to 9 cents lower.
- August soybean futures are working on a bearish reversal and dipped below the $15.00 support level today, triggering heavy technical sales.
- New-crop futures are being pressured by the forecast for favorably cooler, wetter conditions in the five-day outlook.
- The 6- to 10-day outlook is for the normal to below-normal temps for most of the Corn Belt. The precip outlook calls for above-normal precip in the Dakotas and western Minnesota and dry conditions in the southeast Belt. Other areas are expected to see normal precip.
- Rumors China may sell several metric tons of state soybean reserves are adding to the negative tone this morning.
- The market is not overly concerned about a slight drop in the bean crop's "good" to "excellent" rating from week ago, or its slowed pace of development.
Chicago wheat is 8 to 12 cents lower, while Kansas City wheat is down 5 to 12 cents. Minneapolis wheat is just 1 to 3 cents lower.
- Spillover from corn and soybeans is weighing on the wheat market today.
- But a 2-point decline in USDA's "good" to "excellent" rating for the spring wheat crop is helping to limit pressure on Minneapolis wheat.
- While global wheat demand is perking up, supplies from other exporters (primarily the Black Sea region) are priced under U.S. wheat. Taiwan did tender for 97,200 MT of U.S. milling wheat overnight. But traders want to see a big tender or purchase.
- Traders will be focusing on field reports from the Wheat Quality Council's HRS tour, which kicked off this morning. Final Day 1 results will be released this evening.
Live cattle futures are enjoying slight gains this morning, while feeder cattle futures are slightly to moderately higher.
- Spillover from lean hogs and ideas seasonal strength is ahead are lifting live and feeder cattle futures this morning.
- But buying enthusiasm is being kept in check by Cold Storage data for the beef market yesterday. Frozen beef stocks as of June 30 of 480.6 million lbs. came in around 6.6 million lbs. above the average pre-report trade guess and up 2.5% from year-ago.
- Daily boxed beef action has also remained lackluster, though traders are optimistic a rebound is ahead. Yesterday Choice and Select boxed beef prices fell 24 cents and 97 cents, respectively, and movement was a very light 126 loads.
- But tighter showlist estimates this week in Texas and Nebraska and near steady showlists in Colorado and Kansas could keep the cash market supported.
- Feeder cattle futures are benefiting from weaker corn prices and expectations for tighter supplies ahead.
Lean hog futures gapped sharply higher on the open and are enjoying slight to sharp gains with nearby contracts leading the charge.
- USDA's Cold Storage Report yesterday showed the largest month-to-month drop in frozen pork stocks on record. Frozen pork stocks as of June 30 declined more than 94 million lbs. from last month to 564.9 million lbs., which was around 61 million lbs. below the average pre-report trade guess.
- This signals demand was stronger than thought over the past month, which is lifting nearby futures contracts today.
- The upside gap in futures encouraged some technical buying, as well. And the August contract is being lifted by the $1.50 discount it holds to the cash hog index.
- But a decline in the pork cutout value yesterday on light movement is keeping bullish enthusiasm in check for deferred contracts.
- Recent declines have kept packer cutting margins in the red. Plus most are well supplied for near-term needs. But daily slaughter data shows average hog carcass weights have fallen by a pound due to summer heat. This is keeping cash bids mostly flat today.