Corn futures opened under pressure, but the market has since firmed to trade 1 to 2 cents higher in most contracts.
- Traders have shifted gears to mild short-covering following yesterday's Supply & Demand Report, which drew a bearish reaction.
- While USDA's 2013-14 carryover estimate of 1.456 billion bu. came in 31 million bu. below expectations, the figure still represents ample supplies.
- Spillover from the soybean and wheat markets and ideas corn demand remains strong are also supportive.
- However, Gulf corn basis is down a penny for immediate delivery and 6 cents lower for May delivery this morning, with other months holding steady. There is some concern this may signal a pullback in demand.
Soybean futures have strengthened to post gains of 6 to 13 cents, with new-crop leading to the upside.
- While the initial reaction to USDA's 5 million bu. cut to its 2013-14 carryover estimate was bearish, recognition that this is still a tight carryover figure has traders shifting gears.
- And with the Supply & Demand Report in the past, traders are looking ahead to the March 31 Prospective Plantings Report and corn-soybean mix.
- With the November soybeans:December corn price ratio hovering around 2.47, the incentive for a big increase in bean acres has faded.
- Light support also stems from news Goldman Sachs raised its near-term price outlook for soybeans due to strong export demand and unrest in Ukraine.
- Tight supplies are said to be lifting basis at interior locations. Gulf basis is steady this morning.
Wheat futures have extended early gains to trade double-digit higher in most contracts of all three flavors.
- Pressure on the wheat market yesterday has given way to bargain buying.
- Warm and windy conditions in the Southern Plains keep drought concerns in mind as the winter wheat crop exits dormancy. Topsoil moisture in Texas was rated 76% short to very short in Texas as of March 9.
- However, a storm event is expected to bring some precip to some areas of winter wheat country this week.
- And with corn and beans in positive territory, traders have been able to respond more positively to USDA's steady 2013-14 peg, which was on the friendly side of pre-report expectations.
- Unrest in Ukraine, while tempered for the time being, remains an underlying source of support.
- Gulf HRW basis firmed 1 to 5 cents for near-term delivery, while Gulf SRW basis is up 2 cents for immediate delivery and steady to a penny higher for deferred delivery. This signals export demand news may be on the horizon.
Live cattle futures gapped higher on the open and are posting slight to moderate gains in most contracts. Feeder cattle futures are slightly to moderately higher, too.
- Gains in the boxed beef market are propelling futures to start the week. Traders are also working to align the front month with last week's $148 to $150 cash cattle trade.
- Yesterday Choice and Select values surged $2.88 and $3.12, respectively. But movement slowed to 105, signaling retailer resistance to lofty prices.
- This along with tighter showlist estimates this week would typically point to higher cash cattle trade. However, the formula was the same last week and trade took place at $2 lower prices.
- But gains in the boxed beef market have dramatically improved packer profit margins this week. They are now hovering just 90 cents shy of breakeven, according to Hedgersedge.
- The uptrending pattern of the market also favors market bulls.
- Softer corn prices and tight supplies are lifting feeder cattle futures.
Lean hog futures are off to a mixed start with nearbys slightly to moderately higher and deferreds under pressure.
- Lean hogs are seeing a mix of followthrough buys and mild profit-taking following yesterday's charge to the upside. The market is also seeing some bull spreading.
- The pork cutout value continues to surge. It firmed $2.42 yesterday though movement slowed to 218 loads. Traders expect pork prices to remain elevated as they are still a value relative to beef. Plus, supplies typically tighten through spring and summer.
- And the porcine epidemic diarrhea virus (PEDV) means this trend could be even more pronounced this year.
- However, the market remains vulnerable to a setback as it is heavily overbought. Plus, April lean hogs hold around a $11 premium to the cash index, which stands at $104.73.