Market Snapshot, 10:00 a.m. CT -- (VIP) -- October 25, 2013

October 25, 2013 04:59 AM
 

Corn futures have seen choppy trade overnight and this morning. Futures are currently marginally higher.

  • Buying and selling interest are limiting in the corn market as traders even positions ahead of the weekend. Similar sentiment has restricted price action to a narrow range for the month of October.
  • Recent weekly and daily export sales announcements signal the combination of lower corn prices and weaker U.S. dollar index are attracting strong export demand. But with harvest underway and reports of a "better-than-expected" crop, this has only been enough to stave off selling pressure.
  • Strong demand may garner a bit more buying interest once harvest passes half complete as related hedge pressure will ease. USDA will provide an update on harvest progress on Monday. Harvest was last reported 39% complete as of Oct. 20.
  • Corn Belt conditions are expected to be favorably dry over the weekend, but rain and snow is forecast to move into the northern Plains and Midwest early next week.

Soybean futures are posting losses of 1 to 10 cents this morning, with deferred contracts leading losses.

  • Soybean futures are seeing profit-taking pressure to wrap up the week. Gains in the U.S. dollar index are also encouraging to that end.
  • As has been the trend this week, the bean market is brushing off confirmation of strong demand. China and Taiwan both made purchases of 120,000 MT of 2013-14 beans this morning.
  • The cancellation of the October Crop Production and Supply & Demand Reports due to the government shutdown means the market is still relying on pre-harvest projections from USDA to form crop opinions; traders are not concerned about rationing supplies.
  • The fact that the November contract has only been able to close above the 50-day moving average two times this month despite multiple challenges is also a source of pressure.
  • Mostly dry conditions in the Corn Belt this week is thought to have helped farmers move into the final stages of harvest. USDA will provide a progress update on Monday.

Wheat futures are enjoying mild gains of around a penny in most contracts as the market has pared overnight gains.

  • Gulf SRW basis surged 5 and 4 cents for October and November delivery, respectively, and December delivery firmed 2 cents. This signals the big dip in the U.S. dollar index last week is encouraging some export buys.
  • South Korea purchased 55,100 MT of U.S. wheat overnight. Japan also booked some U.S. supplies in its purchase of 38,900 MT of food wheat, though Canada and Australia got the bulk of the business.
  • Concerns about frost damage to Australia wheat crop adds to existing production concerns in Argentina, Brazil and the Black Sea region.
  • Russian farmers are expected to hold back on sales of wheat in hopes of higher prices for the month of November as Kazakhstan evaluates the quality of its crop.
  • But a return of favorable warmth for the emerging and establishing winter wheat crop on the Southern Plains is keeping buying in check. The U.S. crop is off to a strong start, which USDA data will likely reflect on Monday.

Live cattle futures gapped sharply higher on the open and October through February contracts are enjoying moderate gains. Feeder cattle futures are slightly higher.

  • Cash and product market strength are boosting the cattle market to wrap up the week.
  • Tight supplies and the rise in Choice boxed beef values to more than $201 per cwt. this week led to record-high cash prices this week.
  • Cash prices ranged from $131 to $134, with the bulk of sales taking place around $132. Last week, trade took place mostly between $129 to $130.
  • But negative cutting margins for packers means they could resist high prices going forward though supplies are expected to continue to tighten well into 2014.
  • The market is also vulnerable to technical profit-taking pressure as the 14-day Relative Strength Index shows the front-month is sharply oversold.
  • Tyson Foods Inc. has announced it has stopped buying slaughter-ready cattle from Canada due to expenses related to Country of Origin Labeling (COOL). This will likely further tighten U.S. supplies.

Lean hog futures gapped higher on the open and are moderately higher in most contracts.

  • Lean hogs are seeing strong followthrough buying today. Gains in the cattle market add to bullish enthusiasm.
  • Futures continued to be lifted by talk of additional PEDV cases in North Carolina as temperatures cooled this fall, as this would tighten supplies further.
  • Also the cash hog index continues to rise and it maintains around a $1 premium to the December contract, despite recent gains in futures.
  • A $1.04 rise in the pork cutout value yesterday boosted already strong packer cutting margins. Movement was fairly tepid, however, at 327.33 loads. There is also optimism high beef prices will lift pork demand.
  • Packers are well supplied on near-term needs, which is expected to keep the cash market steady to lower today.
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