Market Snapshot, 10:00 am CT (VIP) -- February 5, 2013

February 5, 2013 04:05 AM
 

Corn futures softened slightly with the open of pit trading to post losses around 2 to 7 cents.

  • Recent weather updates hold rain chances for Argentina this weekend and next week. This is causing traders to remove some weather premium today.
  • Strength in the U.S. dollar index is also encouraging of profit-taking.
  • Plus, Gulf corn basis softened a penny for spot and March delivery this morning, though it firmed for April shipment.
  • Traders are also beginning to look ahead to Friday's Supply & Demand Report from USDA.
  • Pre-report expectations are for USDA to lower its Argentine corn production tally from 28 MMT to 26.261 MMT. Somewhat offsetting this, analysts expect USDA to raise its Brazil corn production estimate by 0.283 MMT to 71.283 MMT.

 

Soybean futures have trimmed early losses to trade mostly fractionally to 4 cents lower.

  • Two rain systems are expected to bring favorable precip to Argentina this week and over the weekend. This has encouraged light profit-taking this morning.
  • But as weather is expected to remain hot and dry in southern Brazil and China remains a major buyer of U.S. beans for the time being, pressure is limited.
  • Pre-report expectations for Friday's report are that USDA will trim its Argentine soybean production estimate by nearly 1 MMT to 53.095 MMT, but it is expected to raise its Brazilian production estimate slightly to 82.645 MMT from 82.500 MMT last month.
  • Thus far, soybean futures have held above key support at the 100-day moving average, which intersects around $14.72 1/4 today.

 

Wheat futures are roughly 2 to 5 cents lower in Chicago and Minneapolis, while Kansas City is down around 6 to 7 cents.

  • Losses in the corn and soybean markets along with slight strength in the U.S. dollar index is encouraging selling in the wheat market.
  • Rain in the forecast for the Central and Southern Plains this weekend is also pressuring futures. However, much more precip is needed as more than half the HRW wheat crop is rated "poor" to "very poor" in Oklahoma, South Dakota and Nebraska.
  • Pressure is also coming from news India is looking for a way to increase its wheat exports as its government-owned reserves are more than three times the minimum requirement.
  • But pressure is being limited by reports Russian officials have decided to lift the 5% duty on grain imports until mid-summer following a government meeting on the grain situation. The duty will likely officially be lifted something this spring.
  • Meanwhile, Statistics Canada reports wheat stocks at the end of December of 20.7 MMT were lower than traders expected and 0.7% lower than the previous year.

 

Live cattle futures are favoring the upside in mixed trade this morning. Feeder cattle futures are posting slight gains in most contracts this morning.

  • Traders still have the tightening supply outlook from Friday's Cattle Inventory on their minds, which is encouraging some light followthrough buying.
  • Also, while showlist estimates are up slightly from week-ago, the week prior featured a large drop in numbers.
  • However, recent declines in the boxed beef market and firmer cash prices last week have pulled packer profit margins even deeper into the red. This may cause some to further reduce kill hours, which would make them less likely to pay up for cattle this week.
  • Yesterday the boxed beef market did finally see a rise in prices, sparking cautious optimism the market may finally be putting in a low. Choice cuts rose 18 cents, Select cuts firmed 39 cents and movement was solid at 206 loads.
  • Feeder cattle futures are also benefiting from weakness in the corn market today.

 

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

  • Traders are taking advantage of a firmer U.S. dollar index by booking profits today.
  • Yesterday's $1.03 decline in the pork cutout value raises concerns about demand, especially considering recent slower movement.
  • Plus the decline pulled packer profit margins deeper into the red. Packers are paying mostly steady prices for market-ready hogs today on moderate demand. Saturday's kill is expected to be down 20,000 to 30,000 head from recent weeks.
  • Pressure on both the February and April lean hog contract is being limited by the $1-plus discount they hold to the cash hog index.
     
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