Market Snapshot, 10:00 am CT -- Advice (VIP) -- June 5, 2013

June 6, 2013 05:09 AM
 

SOYBEAN PRODUCERS: INCREASE 2013-CROP CASH SALES... While there are serious planting delays across the Corn Belt, we still firmly feel price strength in the soybean market must be rewarded with sales. With November soybean futures falling back into the long-term downtrend, the recent push above that level looks like a bull trap. Soybean hedgers and cash-only marketers are advised to make a 10% 2013-crop cash forward contract sale for harvest delivery to get to 20% sold in the cash market on expected new-crop production.

Hedgers should continue to hold the 50% hedge in November soybean futures. With November beans looking technically toppy, we expect to see additional near-term price pressure that will allow us exit the hedge will a lesser loss than at current levels.

 

Corn futures are seeing some bull spread unwinding today and are fractionally lower in the front-month and mostly 2 to 3 cents higher in deferred contracts.

  • The corn market is seeing some bargain buying this morning. While the need for replanting and delayed planting of unseeded acres has not been enough to spur active buying, these concerns are enough to stem selling pressure.
  • Weakness in the dollar index is also encouraging of some short-covering today.
  • But that is likely the extent of buying interest as this morning's Weekly Export Sales Report reminded of slow demand. Sales of 107,200 MT for 2012-13 and 51,600 MT for 2013-14 fell well short of expectations and week-ago. China was notably absent from the list of buyers.
  • A 3-cent slide in Gulf basis this morning signals fresh export demand news is lacking.

 

Soybean futures got off to a mixed start, but bears have since taken the upper hand to push futures 7 cents lower in the front-month and double-digit lower in deferreds.

  • Recent strong gains in old-crop futures on tightening supply prospects is encouraging some profit-taking today.
  • Also, this morning's weekly export sales data reminded of slowing demand for old-crop beans as just 48,400 MT were sold for 2012-13. But new-crop bean demand remained solid and at 589,900 MT for 2013-14 delivery and the overall tally met expectations.
  • Weekly soymeal export sales came in well above expectations at 134,200 MT for 2012-13 and 137,100 MT for 2013-14. Weekly soyoil export sales also improved from recent weeks to 30,500 MT.
  • Gulf soybean basis softened by 5 cents for immediate delivery this morning, also reflecting softer demand.
  • Traders are putting more emphasis on expectations soybeans will pick up corn acres due to wet, cool weather rather than ongoing soybean planting delays.

 

Wheat futures are mostly 1 to 5 cents higher at all three locations today.

  • This morning's weekly wheat export sales topped expectations as a net sales reduction of 33,200 MT for 2012-13 was more than offset by sales of 664,900 MT for 2013-14.
  • News South Korea is expected to receive its first cargo of U.S. wheat since the GMO wheat discovery in Oregon has eased concerns that this could have a major impact on U.S. wheat exports.
  • Buying interest in Kansas City wheat futures is being limited by news recent rain has improved the drought footprint in Oklahoma and Kansas.

 

Live cattle futures are posting slight to moderate gains in light early trade. Feeder cattle futures are off to a slightly lower start.

  • Expectations are building for cash cattle trade to take place at $123 on the Southern Plains, which would be down $1 from last week. So far, just very light sales at $123 to $125 in Iowa have taken place.
  • But June futures are at a discount to these prices, opening the door for some short-covering.
  • Choice boxed beef cuts slid 89 cents and Select rose 47 cents yesterday, but movement was strong at 224. Improved movement on softer prices has been the trend this week, easing demand concerns.
  • But this has also pared lofty packer profit margins, which is expected to weigh on the cash market this week.
  • Also, weekly beef exports for the week ended May 30 fell 6,200 MT from the week prior to 12,800 MT. However, beef prices have since softened.
  • Firmer corn prices are encouraging some profit-taking in feeder cattle futures.

 

Lean hog futures are slightly to sharply higher this morning.

  • Strength in the pork market and tightening supplies are supporting lean hog futures this morning. Early gains triggered buy stops for the July contract.
  • Spillover from live cattle and a sharply lower dollar are also supportive this morning.
  • The pork cutout value rose 84 cents yesterday and, even more impressive, movement picked up to 422.9 loads. This is easing concerns about the impact of cool, wet weather on grilling.
  • But despite recent pork market improvement, packer profit margins remain in the red. Thus, some packers are trimming kill hours and keeping bids lower in an effort to improve margins. Others in need of tightening market ready supplies have had to raise bids.
  • Traders are not overly concerned about an 8,500 MT decline in pork export sales for the week ended May 30 to 6,600 MT.
     
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