Market Snapshot, 10:00 am CT (VIP) -- Advice -- March 27,2013

March 27, 2013 05:14 AM
 

CORN AND SOYBEAN PRODUCERS: MAKE INITIAL 10% 2013-CROP SALES

December corn futures and November soybeans have rallied nearly 30 cents from the lows posted early this month. While prices aren't at levels at which we had hoped to start 2013-crop marketings, the recent price strength and the calendar say it's time to make initial new-crop sales. Plus, we want to get some sales on the books prior to USDA's reports on Thursday. Hedgers and cash-only marketers are advised to sell 10% of expected 2013-crop corn and soybean production via cash forward contract because new-crop basis is relatively strong for harvest delivery.
 

 

Old-crop corn futures improved slightly with the open of pit trading to post slight gains. New-crop futures remain steady to 2 cents lower.

  • The market remains squarely focused on readying positions for USDA's key Prospective Plantings and Quarterly Grain Stocks Reports. Three of the past five quarterly stocks reports have spurred limit-moves in front-month corn contracts.
  • The grain stocks report is also expected to remind of tight old-crop supplies with corn stocks as of March 1 expected to come in at 5.03 billion bu., the tightest level since 1998.
  • Gulf corn basis firmed for immediate delivery this morning, also reminding of tight supplies.
  • Expectations are for slightly larger corn plantings in 2013 of 97.3 million acres, which could eventually ease the tight supply situation -- of course, depending on the weather.
  • Reports the U.S. is importing a cargo of Argentine corn and that more may be on the way are limiting buying interest..
  • Also, weekly ethanol production fell 0.5% last week to 805,000 barrels per day.

 

Soybean futures have softened slightly to trade steady to slightly lower.

  • Dollar strength is encouraging traders to exit positions and head to the sidelines before USDA's key data releases tomorrow and the extended holiday weekend.
  • Traders' expect soybeans will pick up roughly 1.3 million acres over year-ago for seedings around 78.5 million acres.
  • Traders will also watch the Quarterly Grain Stocks Report for a gauge of the usage pace during the second quarter of 2012-13. Pre-report expectations are for soybean stocks of 947 million bu. as of March 1.
  • Gulf soybean basis is 6 cents stronger this morning for immediate delivery, signaling fresh export demand for U.S. soybeans may be on the horizon.
  • But the market remains wary of adding long positions as the record-large South American crop will eventually come available.

 

Wheat futures are the upside leader this morning, with most contracts at all three locations enjoying gains around 3 to 6 cents.

  • The market is paying a bit more attention to the state of the winter wheat crop as weekly condition reports will start up again next week.
  • Freeze events in the Plains this week are concerning as much of the Texas and Oklahoma crop is jointing. Plus, the forecast holds chances for a major winter storm in the Central Plains early next week.
  • But buying interest outside of short-covering will be limited, as the market needs a steady stream of demand news and/or spillover support from corn to rally.
  • Negative outside markets are also a limiting factor.

 

Live cattle futures got off to a mixed start, but most contracts are favoring the upside. Feeder cattle are mixed with nearby contracts slightly higher and deferred months slightly lower.

  • Uncertainty as to cash cattle prospects is limiting both buying and selling interest in the live cattle market.
  • On one hand, boxed beef market performance continues to disappoint as chilly temps have delayed retailer purchases ahead of the grilling season. Below-normal temps are expected again next week in the Central and Northern Plains as well as the Midwest.
  • Yesterday, Choice boxed beef values fell 15 cents and Select fell $1.04. Movement was decent at 179 loads, however.
  • But showlist estimates are down notably from week-ago and the Cattle on Feed Report last week points to ongoing supply tightening.
  • Light cash cattle trade took place at $125 in Texas, but the absence of bids elsewhere signals this was likely an isolated event.
  • Weakness in the corn market is encouraging light profit-taking in feeder cattle futures.

 

Lean hog futures are posting slight to moderate losses this morning.

  • After staging a late rally on ideas a seasonal rebound may be near yesterday, traders are back to booking profits today. Strength in the U.S. dollar index on disappointing pending home sales data is also encouraging of this.
  • The pork cutout fell another 37 cents yesterday. And while this did encourage strong movement of 90.21 loads, it raises concerns about ongoing weak pork demand.
  • Unexpected cash market strength yesterday signaled packers did not have near-term needs secured as previously thought and/or that packers are ramping up production to take advantage of profitable margins. Steady to firmer bids are being seen again today.
  • Average hog weights in Iowa and Southern Minnesota declined 1.3 lbs. for the week ended March 23, signaling marketings are current.
  • Light pressure also stems from the nearly $5.00 premium April lean hogs hold to the cash index.
     
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