Market Snapshot, 10:00 a.m. CT -- (VIP) -- October 22, 2013

October 22, 2013 05:04 AM

Corn futures are mostly 2 to 4 cents lower this morning after trading mixed overnight.

  • Hedge pressure related to harvest activity remains a weight on the market. Recent rains in the Midwest and snow in the northern part of this region today will keep the pace of harvest well behind the norm and seasonal pressure to linger.
  • The 6- to 10-day outlook calls for unseasonably cool temps and the normal to above-normal precip for the Midwest, which also points to slow progress.
  • USDA data yesterday showed corn harvest at 39% complete as of Sunday, which compares to 53% on average. Hedge pressure will remain in effect until progress passes half complete.
  • Ongoing reports of better-than-expected yields are also giving bears an edge, as is spillover pressure from the bean market today.
  • Sharp losses in the U.S. dollar index on disappointing September employment data are helping to limit pressure this morning.
  • Also, a 1-cent uptick in Gulf corn basis for November delivery could indicate some value buying is occurring among exporters.

Soybean futures continue to post losses around 7 cents.

  • Technical-based profit-taking continues to pressure beans after the November and January contracts closed above the psychologically significant $13.00 mark yesterday.
  • Yesterday's progress data from USDA came in about as expected with harvest 63% complete as of Sunday, signaling hedge pressure should be easing. This is behind the average pace of 69% complete.
  • Gulf basis rose a penny for December delivery and firmed 6 cents for February delivery, while other delivery months were steady. This signals some export business may be in the works. Taiwan purchased 120,000 MT of U.S. soybeans overnight.
  • Also, traders were reminded of strong Chinese demand today as the country's Ministry of Commerce raised its soybean import forecast for October by 2.22 MMT to 5.85 MMT. If realized, imports would be up sharply from September.

Wheat futures have reversed overnight losses to trade 1 to 3 cents higher for all three flavors.

  • Pressure to start the week has given way to short-covering amid ideas the downside has been overdone. Sharp losses in the U.S. dollar index are also encouraging to that end.
  • USDA's first winter wheat condition rating pegged the crop at 65% "good" to "excellent." When the data is plugged into Pro Farmer's weighted Crop Condition Index, they show the HRW crop at 368 and SRW at 376 (0 to 500 point scale), indicating a strong start to the season.
  • A 2-cent rise in Gulf SRW basis for immediate delivery signals more export news may lie ahead. This will be needed to encourage buying interest outside of short-covering.
  • A flurry of export activity this morning and overnight signals strong wheat demand. Jordan bought 100,000 MT of wheat in its optional origin tender, Bangladesh tendered for 50,000 MT of wheat, Algeria bought at least 150,000 MT of durum wheat (likely of Canadian and Mexican origin) and the South Korea tendered for 60,000 MT of feed wheat. Key will be if the U.S. gets any of this business.

Live cattle futures gapped higher on the open and the market is enjoying slight to moderate gains. Feeder cattle futures are moderately higher.

  • Tighter showlists along with strength in the boxed beef market to start the week are lifting the cattle market today. Sharp weakness in the U.S. dollar index on disappointing jobs data is also supportive.
  • Yesterday, Choice beef values surged $2.00, while Select rose $1.67. The higher prices did slow movement to 121 loads, however.
  • This combination could help packers to get higher prices relative to last week's $129 to $131 trade, with most sales in the Southern Plains taking place at $129. October futures are trading in line with the upper end of this range.
  • A weaker tone in the corn market is supportive for feeder futures this morning.

Lean hog futures gapped higher on the open and futures are enjoying moderate gains.

  • Lean hog futures are benefiting from efforts to narrow the December contract's discount to the newly released CME lean hog index that stands at $90.43. Traders have been in the dark as to the cash index since the start of the month. The index signals cash market losses were overstated in recent weeks.
  • Improvement in the product market is also lifting futures this morning. The pork cutout value rose $1.69 yesterday, though movement failed to impress.
  • This strengthened packer profit margins. Nevertheless, early cash hog bids are steady to lower as this week's slaughter is expected to be down from last week and year-ago and supplies are readily available.
  • Weakness in the U.S. dollar index and spillover from live cattle add light support.
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