Market Snapshot, 10:00 am CT (VIP) -- February 1, 2013

February 1, 2013 04:06 AM
 

Corn futures continue to enjoy gains around 2 to 4 cents after the start of pit trading.

  • Traders are starting February with a risk-on attitude, as evidenced by strong gains in the stock market and the Continuous Commodity Index. An uptick in consumer sentiment in January and an as-expected jobs report led to this.
  • A rain-producing system is expected to continue to move through Argentina and Brazil today and through the weekend, but disappointing rain totals in Argentina overnight associated with the system has encouraged some short-covering ahead of the weekend.
  • Some traders are cautiously optimistic demand may be improving thanks to recent improvement in Gulf basis. But this morning, Gulf basis was a penny lower for April and steady for other months.

 

Soybean futures have backed off gains seen just after the start of pit trading to trade mostly 5 to 11 cents higher with nearbys leading to the upside.

  • This week, soybeans took out key areas of resistance, spurring some technical buying as the market appears headed for a test of the December highs.
  • This rally was encouraged by dryness concerns in South America and a still-impressive soy demand story from China.
  • Recent forecast updates are also supportive as forecasters scaled back rain chances for next week and call for a return of heat and dryness around midweek.
  • This week, there were three daily sales announcements to China totaling 615,000 MT of new-crop soybeans.
  • Outside markets are also encouraging of commodity buying today.

 

Wheat futures have extended early gains to trade mostly 4 to 7 cents higher at all three locations.

  • Wheat futures are benefiting from spillover support from corn and especially soybeans.
  • Weakness in the U.S. dollar index and a broad risk-on attitude to start the month is adding support.
  • Also, the USDA attaché in Argentina says the country's wheat harvest totaled 10.3 MMT, which was down 0.7 MMT from USDA's latest estimate. This keeps tightening global wheat stocks in mind.
  • Meanwhile, dryness across the U.S. Central and Southern Plains remains an underlying source of support.

 

Live cattle futures are off to a narrowly mixed start while feeder cattle futures are posting slight losses.

  • Traders are again focusing on evening positions ahead of this afternoon's post-market-close release of the Cattle Inventory Report, which is expected to reflect tightening supplies with all cattle and calves at 98.2%. If realized, this would represent the smallest U.S. herd since 1952.
  • Cash cattle trade is thought to be largely complete in the Southern Plains after a few additional sales at $125 yesterday. But trade has not yet taken place in Nebraska. Nearby futures are at nearly a $3 premium to these prices.
  • Also limiting buying interest is the ongoing slide in boxed beef prices. Choice values fell $1.44 and Select cuts fell 77 cents yesterday, though movement was strong at 227 loads.
  • Outside markets are supportive of short-covering today. The U.S. dollar index is under pressure and the stock market is enjoying strong gains as the jobs report came in as expected and consumer sentiment unexpectedly improved in January.
  • Strength in the corn market is encouraging profit-taking in feeder cattle futures.

 

Lean hog futures are posting slight gains across the board this morning.

  • Steady to higher cash hog bids today are giving futures a lift. Travel disruptions due to both an ice and snow storm this week means some packers are still in need of supplies.
  • Plus, supplies are tightening seasonally and sub-zero temps in the upper Midwest make producers unwilling to move animals.
  • But buying interest will be limited by recognition yesterday's slide in the pork cutout market pulled packer profit margins deep into the red, though this did encourage strong movement. Negative margins will remain a limiting factor for both the cash and futures markets over the near-term.
  • The February contract is benefiting from efforts to keep it in line with the cash hog index, which was most recently projected at $88.25.
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