Market Snapshot, 10:00 a.m. CT -- (VIP) -- March 20, 2014

March 20, 2014 05:03 AM
 

Corn futures have extended losses to trade mostly 6 to 7 cents lower.

  • Profit-taking is keeping prices in negative territory this morning. A pullback in the soybean market increased selling pressure on corn.
  • Corn futures have not strayed far from unchanged this week, as traders are concerned demand may slow if old-crop moves above $5.00, but tensions in the Black Sea region are limiting selling interest.
  • Weekly corn export sales of 745,800 MT for 2013-14 topped expectations and rose 20% from the prior four-week average. Exports of 927,100 MT were also impressive.
  • News Japan's use of corn in feed rations rose to 45.7% in January compared to 42.2% the previous year is also supportive as it confirms corn prices have become more competitive.
  • Gulf basis slid 1 to 4 cents for near-term delivery this morning, which could point to better river transport and/or increased farmer sales.

May beans are holding onto slight gains, while the rest of the market is 2 to 7 cents weaker

  • Confirmation of strong demand via this morning's Weekly Export Sales Report encouraged traders to extend overnight gains. But this has given way to some profit-taking.
  • Soybean sales of 202,200 MT for 2013-14 and 437,500 MT for 2014-15 topped expectations by a wide margins. Plus, the tally included no major order cancellations by China. Exports of more than 1.119 were also impressive with China as the lead recipient.
  • Total soymeal sales of 486,900 MT (near evenly split between marketing years) were also strong and more than double the top end of expectations.
  • Nearby contracts are also benefiting from USDA's announcement China made a daily purchase of 120,000 MT of new-crop soybeans.
  • The market is also digesting reports China is reselling it South American soybean buys to the U.S., though the exact amount varies depending upon the source.

Wheat futures have seen two-sided trade this morning. SRW wheat has weakened while HRW and HRS wheat are favoring a weaker tone in mixed trade.

  • Profit-taking pressure overnight has given way to some bargain buying in the HRS and HRW markets.
  • Ongoing political tensions between Ukraine, Russia the U.S. and others remains a source of underlying support, as traders believe the U.S. could eventually benefit from any shipping or production disruptions that result.
  • Also, the Weekly Export Sales Report showed higher prices have not slowed demand. Sales of 401,800 MT for 2013-14 and 195,200 MT for 2014-15 topped expectations.
  • Support also stems from concerns about the impact of drought on the winter wheat crop on the Central and Southern Plains. Warm temps in the region and recent windy conditions have further depleted soil moisture reserves.
  • The three-month temperature outlook is unfavorable for drought relief.
  • Traders are brushing off news Japan's ag ministry sees 2014-15 feed wheat imports at 900,000 MMT, down from 1.07 MMT in 2013-14 due to corn becoming more competitive. This is not surprising.

Nearby live cattle gapped higher on the open and are enjoying slight gains through the October contract. Deferred months are slightly lower.

  • The technical posture of the market favors market bulls and fundamentals favor at least steady cash cattle prices. This is lifting nearby futures live cattle futures.
  • The April contract remains more than $1 below the low-end of last week's cash cattle trade, providing incentive for some additional price gains.
  • And while boxed beef prices declined yesterday, traders were encouraged by a surge in movement to 194 loads. Prices are still just off record levels, after all.
  • Meanwhile, showlist numbers are down this week and supplies are expected to tighten going forward.
  • Tomorrow's Cattle on Feed Report is expected to remind of tight supplies, with On Feed expected to come in at 98.9% of year-ago levels and marketings at 97.0% of year-ago. Placements will be the wild card as expectations span a 16-point spread, with the average standing at 109.7% of year-ago.
  • Beef exports have been largely unfazed by the rally in prices. Weekly sales of 16,300 MT for 2014 and 100 MT for 2015 were solid. And exports of 14,600 MT marked a marketing year high.
  • Losses in the corn market are adding support to feeder cattle futures.

April lean hogs are moderately higher while other spring and summer months are moderately to sharply lower. Far-deferred months are moderately higher, too.

  • April lean hogs have moved above psychological resistance of $125.00. The rest of the market is seeing profit-taking and bull spread unwinding.
  • A downside correction is much overdue according to the Relative Strength Index and the substantial premium nearbys hold to the cash hog index.
  • Adding to the negative tone, weekly pork exports of 5,200 MT for 2014 were a marketing-year low, which suggests prices are rationing foreign demand.
  • On the other hand, a slight 27-cent drop in pork values yesterday spurred impressive movement of 400.18 loads, signaling strong demand is likely on any pullback in prices.
  • Meanwhile, the cash hog market remains steady to higher as strong margins is giving packers plenty of incentive to keep kill lines full. Plus supplies remain tight.
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