Market Snapshot, 10:00 am CT (Advice) -- April 4, 2014

April 4, 2014 05:04 AM

Fed cattle producers: Exit 1st-qtr. hedges… With the first quarter complete, we advise fed cattle producers to lift the portion of hedges in April live cattle futures covering 1st-qtr. marketings. Maintain coverage in that contract for 50% of 2nd-qtr. marketings for now. Also, the April $136 put options held against 1st- and 2nd-qtr. marketings will expire worthless today. Bottom line: Get out of all 1st-qtr. coverage, but maintain the futures coverage for 50% of 2nd-qtr. marketings.

Corn futures are fractionally to 5 cents lower this morning, with nearbys leading to the downside.

  • Mild profit-taking is pressuring corn futures to wrap up the week.
  • Mild gains in the U.S. dollar index after strong gains yesterday are negative for commodities this morning.
  • News China is still evaluating Syngenta's Viptera corn trait (MIR 162) and Reuter's citation of an industry source that does not expect approval until the second half of the year adds light pressure.
  • However, as yesterday's weekly export sales data signals, demand for U.S. corn remains strong overall, despite some Chinese rejections of U.S. corn.
  • The front-month is just below the $5.00 mark, which has acted as both support and resistance in recent sessions.
  • Forecasts for warmer temps in the Midwest late next week have eased concerns about possible planting delays for the time being.

Nearby soybeans have softened to trade slightly lower while new-crop futures are mixed.

  • Early gains in the soybean market have given way to some mild profit-taking in nearby contracts.
  • Mild strength in the U.S. dollar index after an as-expected jobs report is also encouraging to that end.
  • November soybeans are back above the $12.00 level. Whether it finishes the week above or below that mark could be telling of near-term price direction.
  • Meanwhile, selling interest in old-crop contracts has been limited by strong export demand for U.S. beans that has lasted longer than anticipated. This has many expecting USDA to raise its 2013-14 export forecast in next week's Supply & Demand Report.

Wheat futures are under pressure to wrap up the week. HRW wheat is leading to the downside with losses of 16 to 17 cents. SRW and HRS wheat are posting losses around 11 to 15 cents.

  • Wheat futures have violated uptrending support this week and violated other key levels of support. This has accelerated technical sales as it indicates the market has put in a top.
  • Traders are not overly concerned about the start of USDA's weekly crop condition updates Monday as state updates have kept the market appraised of crop deterioration.
  • Plus, improved rain forecasts going forward and recent precip are expected to help the crop. The market is not concerned about a freeze event in Texas overnight.
  • Pressure on the corn market adds to the negative tone in wheat to wrap up the week.

Live cattle futures are sharply lower in most contracts. Feeder cattle futures are seeing more moderate losses.

  • Heavy profit-taking is weighing on the live cattle market to wrap up the week. Signs of a top in the lean hog market has traders thinking the same could be true for live cattle.
  • Nearby contracts found bargain buying on a test of support at the March lows.
  • April live cattle ended the day yesterday at around a $5 discount to this week's expected cash trade.
  • Traders appear unconcerned about the widening discount the front-month holds to last week's cash cattle trade at $152 on the Southern Plains. While steady to lower trade is anticipated, futures are well below bids at $147 in the region that feedlots continue to say are too low.
  • Adding pressure was a steep decline in boxed beef prices yesterday, though this did improve movement to 175 loads.
  • Feeder cattle futures are seeing profit-taking after yesterday's strong gains.

Lean hog futures are sharply lower in early trade, with 2014 contracts trading at or near limit lower.

  • Lean hog futures have delivered strong signals a top may finally be in place. This is encouraging heavy profit-taking ahead of the weekend.
  • Also, some plants have cut hours to account for tight supplies due to the porcine epidemic diarrhea virus (PEDV). This has helped the cash hog market stabilize.
  • Traders are not overly concerned about the steep discount ($7.50-plus) the front-month holds to the cash hog index.
  • Adding pressure are reports China will temporarily restrict U.S. pig imports due to concerns about PEDV until the nations agree on a testing protocol.
  • In addition, pressure stems from a $3.42 plunge in the pork cutout value yesterday. Movement of 381.48 loads signals prices have not yet found value levels.
  • This pulled packer profit margins into the red, also limiting cash hog demand.
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