Market Snapshot, 10:00 am CT (VIP) -- Advice -- January 11, 2013

January 11, 2013 04:02 AM
 

LIVESTOCK PRODUCERS: COVER 25% OF 1ST HALF FEED NEEDS

Corn and soybean meal futures have dropped sharply ahead of this morning's USDA reports. While the trend is definitely down, the recent price action gives livestock producers a "value" buying opportunity. Cover 25% of 1st-qtr. corn needs in long March corn futures and 25% of 2nd-qtr. corn needs in long July corn futures. Also cover 25% of 1st-qtr. protein needs in long March soybean meal futures and 25% of 2nd-qtr. protein needs in long July soybean meal futures. If there's a sharp bearish reaction to this morning's reports, costs on the remaining 75% of first half feed needs will be lower.
 

Corn futures softened with the open of pit trading to post losses of mostly 7 to 10 cents.

  • Traders continue to limit their risk exposure ahead of what has in the past been a set of "surprising" reports.
  • Pre-report expectations are for USDA to trim its annual crop production estimate to 10.629 billion bu. and for USDA to peg Dec. 1 grain stocks at 8.210 billion bushels.
  • Traders expect USDA to peg 2012-13 carryover at 667 million bu, which is up 20 million bu. from December.
  • Otherwise there is little fresh fundamental news for the market to digest and outside markets are a mixed bag this morning. The U.S. dollar index is under pressure, but so is the stock market and crude oil futures.

 

Soybean futures have slightly extended losses with the open of pit trading. Futures are mostly 6 to 18 cents lower.

  • Traders remain squarely focused on readying positions for USDA reports to be released at 11:00 a.m. CT, with bears dominating action.
  • As a result, traders are paying little attention to signs U.S. beans may finally be attracting some value buying. This morning, USDA announced China bought 120,000 MT of beans for 2012-13 delivery. This follows daily buys by China and unknown destinations that totaled 587,500 MT yesterday.
  • Pre-report expectations are for USDA to slightly raise its soybean production estimate as well as its carryover peg to 2.999 billion bu. and 135 million bu., respectively.
  • Traders also expect USDA to estimate Dec. 1 grain stocks at 1.984 billion bu., which is down 386 million bu. from last year.

 

Wheat futures have softened slightly to trade roughly 3 to 5 cents lower at all three locations.

  • Early pressure on wheat comes as traders reduce risk exposure ahead of the 11 a.m. CT release of several USDA reports.
  • More technical chart damage has been done as futures have slipped below support at last week's lows.
  • Traders expect USDA to trim its carryover estimate slightly to 743 million bu. and for it to cut its Dec. 1 grain stock estimate from 2.104 billion bu. to 1.674 billion bushels.
  • USDA will also release its winter wheat seedings estimate. All winter wheat seedings are expected to be up slightly from year-ago to 42.6 million acres, with HRW seedings at 30.3 million acres.
  • News South Korea, Japan and Indonesia all bought Australian wheat this morning is adding light pressure, as it signals U.S. wheat may still have some work to do to attract export business.

 

Live and feeder cattle futures are posting slight to moderate losses this morning.

  • Cash cattle trade got underway at $126 yesterday on the Southern Plains, which compares to trade at $128 in this region yesterday. This is pressuring futures as nearby contracts are at more than a $5 premium to these cash prices.
  • Any additional cash sales will likely be light as additional sales took place late Thursday.
  • Choppy action in the boxed beef market, heavier showlist estimates and negative packer profit margins this week gave packers an edge in negotiations.
  • Yesterday, however, Choice and Select boxed beef values rose 26 cents and 43 cents, respectively, though movement slowed to 169 loads.
  • Traders are unwilling to add risk in feeder cattle futures ahead of the release of what has in the past been a set of major market-moving USDA reports for the grain markets.

 

Lean hog futures are steady to slightly lower this morning.

  • Lacking direction this morning, lean hog traders are booking some light profits.
  • Cash hog bids are expected to be steady to weaker to wrap up the week as packers are generally well supplied and they are dealing with negative cutting margins.
  • But improvement in the pork market yesterday is helping to limit pressure. The pork cutout value rose 49 cents, led by strong gains in hams, and movement was solid at 109.5 loads.
  • Action across the commodity sector remains on hold ahead of the release of key USDA grain and soy reports today. The supply picture painted by the reports could influence hog production intentions.
     
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