Market Snapshot, 10:00 am CT (VIP) -- August 15, 2012

August 15, 2012 05:02 AM
 

Corn futures have firmed slightly to trade 6 to 8 cents higher in most contracts.

  • Corn futures are benefiting from news China's ag ministry says 10% of its corn crop is infested by army worms -- the worst pest infestation in a decade. The China National Grain and Oil Information Center cut its estimate of the 2012 crop to 197 million metric tons (MMT) from 197.5 MMT. USDA pegs Chinese corn production at 200 MMT.
  • Gulf corn basis is steady to weaker as supplies from the South are more readily available.
  • A firmer dollar and a shift to more favorable weather in the Corn Belt is keeping a cap on buying interest, though at this point the crop is beyond repair.

 

Soybean futures rallied with the open of pit trade to post gains in the teens to 30s.

  • Soybean futures are enjoying short-covering on ideas the downside has been overdone and that more price rationing is needed.
  • The soybean crop is small and a number of daily soybean sales last week and yesterday's strong crush data indicates global bean demand remains strong. This morning Gulf basis was firmer for August delivery and steady for other months.
  • Sources say sales of South American soybeans are winding down as supplies tighten, but export sources also say purchases by China will slow in the coming months.

 

Wheat futures have improved to post gains ranging from roughly 4 to 8 cents.

  • Gains in the corn market have encouraged short-covering in wheat as that market stands to benefit from increased feed use.
  • Strength in the U.S. dollar index is limiting buying interest to short-covering, however.
  • SovEcon lowered its 2012 Russian grain crop forecast to a range of 70 MMT to 74 MMT from 72 MMT to 75 MMT previously but it made no changes to its wheat estimate.
  • Algeria has purchased 500,000 metric tons (MT) of durum, turning mainly to Canada, providing another reminder U.S. prices are not as competitive on the global market.
     

 

Live cattle futures are enjoying slight to moderate gains this morning. Feeder cattle are posting slight losses in most contracts.

  • Choice boxed beef values surged $2.32 and Select cuts rose $2.42 yesterday, but movement has notably slowed. This is making traders hesitant to add long positions as it signals Labor Day buying is near complete and that a top is likely near.
  • Nevertheless, the beef gains have most expecting cash cattle trade to take place above last week's $119 to $120.
  • Traders are also beginning to ready positions for the Cattle on Feed Report Friday, which is expected to show On Feed at 100.7% of year-ago, Placements at 91.4% and Marketings at 101.6%.
  • While firmer corn prices put pressure on feeder cattle futures, traders in this market also believe the corn market is near a top, which is limiting selling interest.

 

Lean hog futures are posting moderate losses in early trade.

  • Hog supplies are expanding seasonally, which has kept the cash hog market steady to lower in recent weeks, thus pressuring futures.
  • But improvement in the pork market yesterday pulled packer profit margins further into the black, making those still buying for Saturday's kill willing to keep bids steady today.
  • Also limiting pressure on nearby lean hog futures is the $15-plus discount those contracts hold to the cash index, which stands at $92.31.
  • A Chinese trading firm says it sees the country's pork imports from the U.S. rising around 29% this year. The firm says total pork imports from the U.S. may reach 620,000 metric tons this year.

 

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