Market Snapshot, 10:00 a.m. CT -- (VIP) -- October 23, 2013

October 23, 2013 05:03 AM

Corn futures have extended early gains to trade around 6 cents higher.

  • Corn futures have not strayed far from unchanged thus far this week. Today, bulls have retaken the advantage, thanks to spillover support from the wheat and soybean markets.
  • Cold conditions and recent moisture in the Corn Belt and the 6- to 10-day outlook for more of the same raises a bit of concern about the much-behind-average pace of harvest.
  • USDA's latest progress update showed harvest is just 39% complete, 14 percentage points behind the average pace. Iowa and Minnesota are notable laggards at 35% (50% average) and 19% (49% average) complete, respectively.
  • Gulf corn basis is steady for immediate delivery and steady to a penny weaker for delivery this winter.
  • Lanworth raised its 2013-14 world corn production forecast by 3 MMT to to 955 MMT, citing larger U.S. and Chinese harvest expectations. It expects a 13.792 billion bu. U.S. corn crop.
  • Ethanol production for the week ended Oct. 18 rose 28,000 barrels per day to 897,000 barrels per day. Ethanol stocks rose 80,000 barrels to 15.5 million bales.

Soybean futures have extended early gains to trade 6 to 14 cents higher through the July contract, with the front-month leading gains.

  • Soybeans are benefiting from a reminder of strong demand. Russia bought 120,000 MT of soybeans for 2013-14 delivery this morning.
  • Also, Gulf basis is steady to a penny higher this morning, continuing the trend of recent days. This signals demand news may be ahead.
  • The market will receive an update on export sales for the week ended Oct. 3 tomorrow. Recent reports have reflected improving demand.
  • Lanworth raised its 2013-14 world soybean production projection by 2 MMT to 288 MMT on expectations for larger crops in the U.S. and Argentina. It expects the U.S. bean crop to come in at 3.215 billion bushels.
  • The November and January contract's ability to find buying above the psychological $13.00 level is also a bullish technical factor for the bean market.

Wheat futures have extended early gains to trade 6 to 8 cents higher, with the HRW market leading to the upside.

  • Wheat futures are enjoying some technical-based buying as the December SRW contract finished above the psychologically significant $7.00 mark yesterday and it found followthrough buying interest today.
  • Spillover from the corn and bean markets are also supportive.
  • The market is brushing off news Lanworth raised its global wheat forecast by 1 MMT to 707 MMT, citing expectations for larger Russian production.
  • But the market remains concerned about frost in Argentina and dryness in Australia.
  • Traders are also hopeful tomorrow export sales update for the week ended Oct. 3 will reflect strong demand for U.S. supplies. This would have preceded the major price break in the U.S. dollar index last week, however.
  • Gains are being somewhat tempered by the forecast for warmth in the U.S. Southern Plains, which will help with establishment and development of the recently planted winter wheat crop.

Live cattle futures are posting slight gains in all but the February contract, which is marginally lower. Feeder cattle futures have softened to mixed trade.

  • Cattle futures are building on yesterday's gains amid expectations for higher cash cattle trade again this week, despite negative packer profit margins.
  • Last week, sales on the Southern Plains took place mostly around $129, while Nebraska saw cash prices ranging from $128 to $131. Futures already have these expectations factored into prices.
  • Showlist estimates are down at all locations this week and the beef market has thus far delivered an impressive performance this week.
  • Yesterday, Choice beef values rose $1.04 and Select rose $1.38. But only 151 loads changed hands, which suggests some resistance to higher prices.
  • Feeder cattle futures softened as the corn market strengthened.

Lean hog futures are posting slight to moderate losses in nearbys, while far deferred months are mixed.

  • Profit-taking after yesterday's cash index-inspired runup is weighing on the lean hog market today. While the December contract remains at a $3 discount to index, there is quite a bit of time remaining until the futures contract expires.
  • Recognition of this allowed attention to shift back to the fundamentals, which favor market bears. The cash hog market has trended steady to lower this week as supplies are building seasonally.
  • Packers are enjoying wide profit margins, but slaughter numbers are expected to be down from year-ago and week-ago levels as harvest activity is making farmers less willing to bring hogs to market.
  • Average hog weights in Iowa and southern Minnesota ticked up 0.1 lb. the week ended Oct. 19.
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