Market Snapshot, 10:00 am CT -- July 27, 2012

July 27, 2012 05:06 AM
 

Corn futures have extended to the upside to post gains in the teens, with nearby contracts leading to the move higher.

  • As has been the trend, traders are favoring the long side ahead of the weekend.
  • Crop concerns remain high. Recent and forecast rains would at best stabilize the crop and heat is expected to return next week. Traders expect another big decline in crop condition rating Monday and for Informa Economics to lower its crop forecast at 10:30 a.m. CT.
  • Outside markets are also supportive this morning thanks to better than expected U.S. second quarter GDP data, though 1.5% growth still reflects a sluggish economic recovery.
  • Buying is a bit more cautious today due to recent signs of demand destruction. Talk continues to circulate about feed users importing corn and yesterday's disappointing net export sales reduction lingers over the market.

 

Soybean futures have extended gains to trade 30- to 40-plus cents higher.

  • Recent and upcoming rains are not seen as widespread or heavy enough to have a significant, positive impact on the crop. Plus, some forecasters have turned drier for next week's outlook. Thus, traders are building weather premium back into prices.
  • Traders expect USDA to again lower its crop condition ratings on Monday and for Informa Economics to cut its production forecast this morning.
  • Due to severe drought, International Grains Council slashed its US soybean production estimate to a five-year low of 79 million metric tons (MMT). It also lowered its US bean export forecast for 2012-13 by 12% to 35.5 MMT.

 

Wheat futures have improved to post gains in the 20s for most contracts.

  • Wheat futures are enjoying spillover from corn and soybeans. A weaker dollar is also supportive this morning.
  • Russia's national weather center cut its grain crop forecast by 6 million metric tons (MMT) on both ends of the range to 77 MMT to 80 MMT.
  • Also, International Grains Council today lowered its Russian production forecast by 8.2% to 45 MMT. It also slashed its Russian export forecast to 9 MMT, which compares to 22 MMT the year prior.
  • Scouts on the Wheat Quality Council HRS tour found above-average yield potential along with high quality. Demand for the high-quality US spring wheat crop should be strong.

 

Live cattle futures got off to a lower start, but quickly rebounded and are now enjoying slight gains. Feeder cattle futures are mostly moderately lower.

  • Cash cattle trade got started at $114 in the Central and Southern Plains late Thursday. While up $1 from last week, that's a lower price than some were anticipating. Some feedlots are holding out for higher prices.
  • Nearby live cattle futures are well above these cash prices, limiting buying interest.
  • Yesterday's boxed beef market performance was decent, if not impressive. Prices were mixed, but movement slowed to 194 loads.
  • Gains in corn futures are weighing on feeder cattle futures as it points to expensive feed.

 

Lean hog futures are enjoying slight gains across the board.

  • Lean hog futures are enjoying followthrough buying after yesterday's strong close.
  • The pork cutout value continued its rise yesterday, gaining another 23 cents while movement was decent. This has improved packer profit margins, encouraging ideas cash hog bids will soon strengthen.
  • But today cash hog bids are mostly steady as cooler temps have encouraged producers to market hogs, though they are lighter than usual as heat has limited weight gain.
  • Outside markets are also supportive as the dollar is under pressure and the stock market is posting solid gains.
     
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