Market Snapshot, 10:00 a.m. CT -- (VIP) -- July 12, 2013

July 12, 2013 05:05 AM
 

Corn futures are split with the front month up 8 cents and new-crop futures down 7 to 9 cents.

  • Traders are reducing risk ahead of the weekend amid uncertainty about the weather.
  • Dryness in the Corn Belt after a very wet spring is beginning to stress a shallow-rooted corn crop. Some weather forecasts call for precip in the upper Midwest, but the central Corn Belt is expected to remain dry.
  • USDA's Supply & Demand Report yesterday reflected a tightening of old-crop carryover and an increase in new-crop carryover from last month. This is encouraging some light bull spreading.
  • USDA this morning confirmed China was in the market recently for large purchases of U.S. corn by announcing daily sales of 960,000 MT to the country for 2013-14. This reminds that the price break to $5.00 was viewed as a value buying opportunity.
  • The July contract goes off the board today, which also explains some of its volatility today.

 

July soybean futures have traded more than 60 cents lower today and are currently down around 13 cents. This is causing the rest of the market to post losses in the teens.

  • July soybeans expire today, which is leading to strong price volatility as traders try to exit long positions. Volatility will likely continue in the contract heading into the close.
  • The rest of the market is seeing some profit-taking encouraged by yesterday's strong close and today's strength in the U.S. dollar index.
  • Adding pressure to the bean market is USDA's 295 million bu. new-crop carryover projection and its decision to raise world carryover by 430,000 MT from last month to 74.12 MMT.
  • Weather uncertainty is making the market unwilling to add long positions ahead of the weekend. Fringe areas of the Corn Belt are expected to see precip, but other regions may remain dry. The forecast calls for mostly normal temps.
  • Traders will also get an update on crop development Monday.
  • A 7-cent slide in Gulf basis this morning signals fresh demand news is not likely imminent.

 

Wheat futures are fractionally to 3 cents higher in Chicago, mostly 3 to 5 cents higher in Kansas City and up mostly 2 to 5 cents in Minneapolis.

  • Wheat futures are the upside leader this morning thanks to some favorable report data and recent export demand improvement.
  • While USDA's all wheat crop estimate topped expectations by 57 million bu. and month-ago, the U.S. and global carryover projections came in well below what was anticipated, despite the larger crop. This is largely due to higher feed use projections for 2012-13 and 2013-14.
  • Traders are brushing off news from China's National Bureau of Statistics the country will harvest a record 115.67 MMT of winter wheat this year. Recent export sales to the country and a poor late-season weather there signal this number is likely inflated.
  • Gulf basis firmed 5 to 8 cents for July through November delivery, signaling more demand news may lie ahead.
  • With winter wheat harvest wrapping up in Kansas this week, traders believe the bulk of harvest-related hedge pressure should now be behind the market.

 

Live cattle futures are posting slight losses today, while feeder cattle futures have improved to mixed trade.

  • A slide in the beef market that has prompted expectations for steady to lower cash cattle trade are giving bears an edge as the market readies positions for the weekend.
  • August futures are at a $2.50-plus premium to last week's $119 cash trade on the Southern Plains.
  • Choice and Select cuts fell 35 cents and $1.34, respectively, yesterday, though movement was stronger than earlier this week at 194 loads.
  • But tightening supply prospects remain a source of underlying support for the cattle market.
  • Traders in the feeder cattle market are weighing the steep premium nearby contracts hold to the cash index against favorably lower corn prices.

 

Lean hog futures are posting slight to moderate losses this morning.

  • Ideas the lean hog market has posted a seasonal top is encouraging profit-taking ahead of the weekend. Strength in the U.S. dollar index is also encouraging to that end.
  • The cash hog market has trended steady to lower this week and today as a decline in the pork cutout values has pulled packer profit margins into the red. The pork cutout value is down $8.30 so far this month.
  • The July contract is seeing the lightest losses as traders are unwilling to increase its $1 discount to the cash hog index ahead of its expiration Monday.
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