CORN CASH-ONLY MARKETERS: TRIM OLD-CROP GAMBLING STOCKS... July corn futures have rallied roughly 70 cents from the April low and basis has also strengthened during that span. With the contract set to enter delivery next Friday and July corn holding around a 75-cent premium to the September contract, we want to act now to capture price strength. Cash-only marketers are advised to sell 15% of 2012-crop to get to 90% sold on old-crop. Be prepared to finish old-crop sales if the rally in July corn futures stalls after filling the April 1 gap.
CORN PRODUCERS: INCREASE 2013-CROP SALES... December corn futures have moved into the upper end of the range that has contained prices all spring, a level that has stalled previous rallies in March, April and earlier this month. With the market showing weakness this morning, there are indications this resistance will again turn back December corn. As a result, hedgers and cash-only marketers are advised to make a 15% cash forward contract sale for harvest delivery on expected 2013-crop production. This pushes new-crop sales to 25% of expected production via cash forward contract.
Corn futures are around 7 cents lower in the front-month contract, while deferred months are seeing losses in the teens.
- Marked strength in the U.S. dollar index yesterday and again today after Federal Reserve Chairman Ben Bernanke said the Fed will likely begin winding down its stimulus program later this year is weighing heavily on the commodity sector today.
- This has created a broad risk-off stance. Thus, traders are taking advantage of yesterday's strong gains by booking profits. Early pressure triggered sell stops.
- An unimpressive Weekly Export Sales Report that showed sales of 133,400 MT for 2012-13 and 77,100 MT for 2013-14 is adding to the negative tone.
- Also pointing to slow demand is news U.S. corn accounted for just 40.8% of Japan's corn purchases in April, compared to 83.7% last year.
- And after improving the first half of the week, Gulf corn basis slid a penny for July delivery and held steady for other months this morning.
Soybean futures are posting losses in the teens in old-crop contracts, while new-crop months are down 20-plus cents.
- Strength in the greenback and broad risk aversion is encouraging traders to book profits.
- Also, this morning's Weekly Export Sales Report showed slowed soybean demand as sales of 52,600 MT for 2012-13 and 108,500 MT for 2013-14 fell well short of expectations.
- Weekly sales of soyoil fell well short of expectations and declined 95% from the week prior to 700 MT; soymeal sales of 26,600 MT for 2012-13 and 114,600 MT for 2013-14 met expectations.
- Disappointing Chinese manufacturing data reflecting contraction in the sector raises concerns about the country's economic health going forward.
- The market also expects most producers to have made major progress in getting the soybean crop planted before rains move back into the upper Midwest today.
Wheat futures are down mostly 4 to 6 cents in Chicago and Kansas City. Minneapolis is fractionally to 2 cents lower, though the front-month has seen two-sided trade.
- Nearby wheat contracts are holding up well in the face of heavy spillover pressure from corn and beans and highly negative outside markets.
- Just marginal improvement was seen in the drought profile in winter wheat country, which keeps concerns about the drought- and frost-stricken winter wheat crop in mind.
- But harvest is underway which means hedge pressure will limit buying interest in the wheat market, regardless of the state of the crop.
- This morning's Weekly Export Sales Report pointed to decent export demand despite the GMO wheat scare. Sales 432,700 MT for 2013-14 and 2,000 MT for 2014-15 met expectations.
- Strategie Grains has raised its EU wheat crop forecast by 600,000 MT from last month to 131.5 MMT.
- Spring wheat planting activities on the Northern Plains are again coming to a halt as rains move into the region. This has encouraged some light short-covering at times in Minneapolis wheat futures.
Live and feeder cattle futures are under pressure this morning.
- Traders are taking advantage of dollar strength by booking some profits after yesterday's strong gains as they wait for cash trade to begin.
- Bids and asking prices remain wide, signaling the cash cattle standoff may well continue into Friday. Packers may have the advantage in this week's negotiations as Choice cuts have slid this week and showlist estimates are heavier.
- Last week, cash sales took place at $120 in the Southern Plains. Futures are now in line with these prices.
- Choice boxed beef values slipped $1.26 yesterday and Select rose 30 cents. This encouraged strong movement of 225 loads.
- Traders are also readying for Friday's Cattle on Feed Report, which is expected to show all categories below year-ago levels.
- The market will also have the Cold Storage Report with which to gauge demand Friday. Pre-report expectations are for frozen beef stocks at the end of May to come in at 511.5 million lbs., up 0.3% from the month prior and 19.1% above the five-year average.
- Weekly beef export sales of 9,000 MT declined relative to the week prior, but exports of 15,800 MT were a marketing-year high.
Lean hog futures are narrowly mixed this morning.
- Late profit-taking resulted in a low-range close for lean hogs yesterday. A surge in the U.S. dollar index and recent strong gains in futures are causing mild followthrough selling today.
- But considering highly negative outside markets and broad risk aversion, mixed trade in the hog complex is impressive.
- With July futures at nearly a $4 discount to the cash hog index and with supplies tightening, traders are not yet convinced a top is in. This is limiting selling interest to profit-taking.
- The pork cutout value firmed 92 cents yesterday on strong movement of 407.6 loads. BLT season and buying for the Fourth of July holiday has supported the product market.
- Tightening market-ready supplies have caused some packers to trim kill hours. But with most packers cutting in the black, the cash market mostly steady today.