Market Snapshot, 10:00 am CT (VIP) -- August 9, 2012

August 9, 2012 05:04 AM
 

Corn futures have slightly extended early gains to trade 6 to 10 cents higher in the September through July 2013 contracts.

  • Traders are displaying a greater appetite for risk as they ready positions for USDA's reports tomorrow, which is expected to favor market bulls.
  • Also encouraging buying interest is a reminder that supply rationing is needed. This morning's weekly corn export sales of more than 1.1 million metric tons (MT) for combined marketing years (mostly for 2012-13) matched lofty expectations.

 

Soybeans have rocketed higher to trade 20- to 40-plus cents higher through the January contract, with nearbys leading to the upside. Far deferred months are seeing lighter gains.

  • Traders were reminded that soybean prices may not yet have achieved the rationing needed to make supplies last, encouraging them to heavily favor the long side of the market as they ready for USDA's first survey-based production estimates tomorrow morning.
  • USDA announced a daily soybean sale of 165,000 MT to China for 2012-13 this morning -- the third daily sale this week (one to unknown destinations and two to China).
  • This morning's weekly export sales report showed soybean sales of 105,200 MT for 2011-12 and 195,200 MT for 2012-13. Though these felt short of expectations, the figures represented improvement over last week.
  • The National Drought Monitor shows "extreme" drought has spread across the Midwest, now covering 38.2% of the area, compared to 31.8% last week. This is worrisome for the filling soybean crop.

 

Wheat futures at all locations have strengthened to trade moderately higher, with most contracts enjoying double-digit gains.

  • Strength in the corn market has encouraged short covering in the wheat market, despite a firmer U.S. dollar index.
  • Weekly wheat export sales of 665,300 MT for 2012-13 topped expectations today.
  • With spring wheat harvest moving past half complete, harvest-related hedge pressure is easing.
  • Crop concerns in the Black Sea region remain close at hand, though there is no fresh news on that front today.
  • Tomorrow's reports are expected to be fairly neutral for wheat -- traders expect USDA to lower its all wheat crop estimate slightly to 2.22 billion bushels. It is expected to raise its 2012-13 carryover projection by 17 million bu. from last month to 681 million bushels.

 

Live cattle futures got off to a slightly higher start, but they have since softened to mixed trade. Feeder cattle futures are under moderate pressure.

  • Early gains gave way to light profit-taking as traders wait for cash cattle trade to get underway. Expectations are for trade above last week's $118 prices as boxed beef prices have strengthened along with movement and showlists are slightly tighter than week ago.
  • Yesterday, Choice boxed beef prices rose $1.52 and Select cuts firmed $1.40; movement was also strong at 275 loads.
  • But expectations for higher cash cattle prices are already factored into nearby futures prices, which could open the door for additional profit-taking when cash trade begins.
  • Weekly beef export sales of 18,500 MT were up 17% from last week.
  • Strength in the corn market is again weighing on feeder cattle futures.

 

Lean hog futures are slightly to moderately higher in early trade.

  • Lean hog futures are enjoying some followthrough buying interest after yesterday's gains. Encouraging this is the discount nearby contracts hold to the cash hog index.
  • But the market's upside is likely limited as recent declines in pork prices have pulled some packer profit margins back into the red. Plus, packers should have little trouble securing supplies as hog production will increase in the months ahead and weights are already rising.
  • Cash hog bids are mostly steady today with a few weaker bids.
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