Market Snapshot, 10:00 a.m. CT -- (VIP) -- February 27, 2014

February 27, 2014 04:01 AM

Corn futures have seen trade on both sides of unchanged this morning and the market is narrowly mixed at present.

  • Early profit-taking pressure on the corn market has again given way to some bargain buying. Support stems from confirmation of still-strong export demand.
  • The Weekly Export Sales Report showed corn sales of 840,800 MT for 2013-14 and 1,500 MT for 2014-15. This tally topped expectations. Exports of 853,100 MT were up 15% from the previous week.
  • Adding to the strong demand picture, USDA announced a 284,480 MT corn sale to Mexico for 2013-14.
  • And a 1-cent uptick in Gulf basis for immediate delivery following even stronger gains the past few days signals more demand news may be ahead.
  • Light support stems from news International Grain Council (IGC) says global corn production may decline slightly in 2014-15 as yields decline to more normal levels. IGC left its 2013-14 global corn production estimate at 959 MMT.

Soybean futures surged with the start of day trading. And while nearbys have backed well off early gains, they remain 20-plus cents higher. Deferreds are also enjoying double-digit gains.

  • Early gains triggered buy stops on the way up. However, the March contract's move above $14.50 triggered a round of profit-taking.
  • Traders were impressed by this morning's Weekly Export Sales Report that showed soybean sales of 327,700 MT for 2013-14 and 315,200 MT for 2014-15, with China accounting for the bulk of both the old- and new-crop buys. The overall tally met expectations.
  • China also accounted for nearly 1.1 MMT of total exports of roughly 1.797 MMT the week ended Feb. 20.
  • Also this morning, USDA announced China purchased 112,000 MT of optional-origin soybeans for 2013-14.
  • Shipping delays in South America, as well as concerns the top end of yield potential has been shaved off the Brazilian crop due to late-season dryness in southern Brazil and rains causing quality issues in Mato Grosso, have resulted in ongoing strong U.S. soybean buys by China.
  • Gulf soybean basis is down 7 cents for March delivery and steady for other months.

Wheat futures have pared early losses to trade just 1 to 2 cents lower in the SRW and HRW markets, while HRS wheat is now narrowly mixed.

  • Spillover from corn and soybeans have helped wheat futures to pare early gains.
  • Also, this morning's weekly sales report alleviated concerns that recent price gains have slowed demand. Wheat sales of 365,100 MT for 2013-14 and 199,800 MT for 2014-15 topped expectations. Wheat exports of 547,400 MT were up 97% from the week prior and 54% from the prior four-week average.
  • Wheat futures are being pressured by news Argentina has approved another 500,000 MT of wheat for export, taking the total so far for 2013-14 to 1 MMT. But as we reported yesterday, the attaché in Brazil says millers in the country continue to buy U.S. wheat since Argentina is a "problematic supplier."
  • Meanwhile, the National Drought Monitor reflects the spread of drought in the Southern Plains, which raises concern about the condition of the crop.
  • International Grain Council (IGC) expects global wheat production to decline 2% in the 2014-15 marketing year, relative to the year prior. IGC raised its 2013-14 global wheat crop estimate by 1 MMT to 708 MMT.

Nearby live cattle futures gapped sharply higher on the open; deferred months are mixed with an upside bias. Feeder cattle futures are slightly higher.

  • February live cattle gapped sharply higher on the open as traders worked to close the discount the contract held to the start of cash cattle trade at $150 or higher yesterday.
  • Trade in Nebraska got underway at $152 -- up $4 from the week prior and a record for the region. Kansas and Texas saw trade at $5 to $6 prices relative to the week prior at $150.
  • Propelling these gains is a strong performance in the beef market this week, cold temps at northern locations and historically tight supplies.
  • Yesterday, Choice cuts surged $2.45 and Select jumped $2.69 and movement impressed at 217 loads. Slow movement at the start of the week renewed concerns about retailer resistance to lofty prices, but strong movement in recent days has quelled such fears.
  • Beef export sales of 11,700 MT the week ended Feb. 20 also signal solid export demand.
  • Feeder cattle futures are benefiting from spillover support and a downside bias in the corn market.

April lean hogs gapped sharply higher on the open and are enjoying gains in excess of $2.00. Deferred months are slightly to moderately higher.

  • April lean hogs are surging amid a wave of technical buying. Spillover from the surge in live cattle and a weaker U.S. dollar index add to the positive tone.
  • But the front-month contract remains severely overbought and at around a $9.50 premium to the cash hog index, raising the risk of profit-taking.
  • While a correction is due, the fundamentals still favor market bulls.
  • Packers are again paying steady to as much as $4 higher cash hog bids today as cold temps and a coming winter storm event gives producers the advantage in negotiations. Also, positive packer profit margins give them incentive to keep kill lines full.
  • Also, the pork cutout value firmed 24 cents and movement was strong at 451.57 loads. This reminds that pork is still a value relative to beef.
  • A reminder Russia will lift its export ban on U.S. pork that is ractopamine free next month is also mildly supportive.
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