Market Snapshot, 10:00 am CT (VIP) -- February 4, 2013

February 4, 2013 03:56 AM
 

Corn futures firmed with the open of pit trading to post gains around 2 to 4 cents.

  • Traders in the corn market booked some profits ahead of the weekend as they waited for the weekend rain event to play out. Rainfall in Argentina was limited as and showers in southern Brazil were generally light, which is supporting futures this morning.
  • Plus the forecast calls for building heat and dryness in southern Brazil and Argentina this week. Thus, traders are building some weather premium into prices.
  • Countering this, however, is a risk-off attitude to start the week. The U.S. dollar index is sharply higher while the stock market and crude oil futures are under pressure.
  • Traders will watch this morning's export inspections report for signs demand is improving. Recent gains in Gulf basis has encouraged some cautious optimism.

 

Soybean futures firmed with the open of pit trading to trade 20-plus cents higher in nearby contracts, while deferred months are seeing gains in the teens.

  • Traders are actively building more weather premium into soybean futures to start the week as the forecast calls for unfavorable heat and dryness in southern Brazil and Argentina this week. Plus, precip relief in these areas over the weekend was limited.
  • Very tight U.S. supplies means the South American crop takes on added significance.
  • Plus, export demand for soybeans remains very strong -- especially from China. USDA today announced China bought 58,000 MT of soybeans for 2012-13 delivery and 58,000 MT for 2013-14 delivery.
  • But steady to lower Gulf basis today signals the recent rally has encouraged some farmer selling.
  • Soybean futures' move through last week's highs also encouraged some technical buying.

 

Wheat futures have slightly extended early gains to trade roughly 1 to 4 cents higher.

  • Wheat futures continue to take its cue from the corn and soybean markets. Therefore, wheat is also enjoying light short-covering this morning.
  • Strength in the U.S. dollar index is causing bulls to exercise some caution, however.
  • News Egypt purchased 60,000 MT of U.S. SRW wheat over the weekend is also supportive, as it signals U.S. wheat may once again be competitive on the global market.
  • But traders will want to see larger purchases to confirm U.S. wheat's competitiveness. Traders expect this morning's weekly export inspections report to show 18 million bu. to 22 million bu. in wheat inspections.
  • Kazakhstan ag ministry says it expects to export 7.8 MMT of grain in 2012-13, up 800,000 MT from its previous forecast. This is still down sharply from 2011-12, when it sold 12.1 MMT onto the world market.
  • Also, SovEcon data shows that it is currently unprofitable for Russia to export wheat, due to unusually high spreads compared to other export origins.
  • But buying enthusiasm is being curbed by late-week rain chances for winter wheat country.

 

Live cattle futures are off to a slightly to moderately higher start. Feeder cattle futures are mixed with an upside bias.

  • Friday's bullish Cattle Inventory Report is giving bulls the advantage today, as it showed the cattle herd at its smallest level since 1952 and that herd expansion has begun.
  • But this is being offset by ongoing declines in the boxed beef market. Choice values fell $2.76 on Friday and Select was down $1.63, though movement was strong at 238 loads.
  • Recent declines and firmer cash cattle prices have pulled packer profit margins deep into the red.
  • Plus, the inability of the boxed beef market to put in a low raises concern about consumer demand, especially considering recent tax hikes and rising gas prices cutting into disposable income.
  • Also limiting gains, nearby futures are well above last week's $125 cash cattle trade.
  • Strength in the U.S. dollar index and corn futures is putting light pressure on feeder cattle futures.

 

Lean hog futures are off to a narrowly mixed start this morning.

  • Lean hog futures are seeing some light short-covering thanks to strength in both the product market and the cash market this morning.
  • On Friday, the pork cutout value rose $1.77, though movement slowed to 48.75 loads. This lifted packer profit margins, though they are still cutting in the red.
  • Early cash hog bids are steady to higher as packers are in need of near-term supplies after transportation disruptions due to storms and frigid temps last week.
  • The February lean hog contract is at a slight discount to the cash hog index.
  • A broad risk-off attitude to start the week is limiting buying interest in the livestock sector.
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