Market Snapshot, 10:00 am CT (VIP) -- February 6, 2013

February 6, 2013 04:08 AM
 

 

Corn futures softened slightly with the start of the open outcry session to trade 5 to 10 cents lower.

  • While unfavorable weather is expected to continue in southern Brazil and Argentina through the weekend, some weather forecasts call for improved precip chances next week. Thus, the corn and soy markets are seeing some profit-taking today.
  • Plus, traders are also readying positions for Friday's Supply & Demand Report update from USDA. Pre-report expectations are for slower demand to result in a 13 million bu. increase to carryover to a still-tight 615 million bushels.
  • Energy Information Agency data released today showed a slight improvement in ethanol production for the week ended Feb. 1 to 774,000 barrels per day (BPD), which is up from a record-low 770,000 BPD the week prior.
  • Gulf basis was a penny lower for April and May delivery this morning and steady for other months, signaling little improvement on the export front is ahead.
  • Negative outside markets are adding to the negative tone.

 

Soybean futures have slightly extended early losses to trade 13 to 15 cents lower.

  • Traders are back to removing some weather premium from soybean prices as some weather models call for better rain chances in southern Brazil and Argentina next week.
  • Plus, the bean market has become accustomed to frequent daily sales announcements to China. Traders recognize that Chinese exports of U.S. beans will likely slow next week as the country begins its lunar holiday celebration
  • But the overall pace of exports remains well ahead of last year. Therefore, traders expect USDA on Friday will trim soybean carryover to 129 million bu., from 135 million bu. in January. But they are hesitant to add positions ahead of Friday in case there is a surprise.
  • In light of such tight carryover supplies, a large South American crop is essential.

 

Wheat futures have softened slightly to trade mostly 8 to 9 cents lower in Chicago and Kansas City while Minneapolis is seeing slightly lighter losses.

  • Negative outside markets and spillover from the corn market are pressuring wheat futures today.
  • Light pressure also stems from ongoing talk about India freeing additional government reserve wheat stocks for exports as the region currently has surplus supplies in reserve and the region is expected to produce a bumper crop this year.
  • Also making it difficult for wheat to find buyers is precip in the forecast for the U.S. Southern Plains this weekend.
  • News Japan will likely use more corn and less wheat for feed needs in 2013-14 is adding light pressure.
  • Traders are also readying positions for Friday's Supply & Demand Report. Traders expect USDA to raise its wheat carryover estimate by 12 million bu. from last month to 728 million bushels. It is expected to cut its global wheat carryover projection by 1.1 MMT to 175.54 MMT, however.

 

Live cattle futures got off to a narrowly mixed start, but they have since softened to post slight losses in most contracts. Feeder cattle futures are mixed.

  • Steady to higher cash trade is expected relative to last week's $125 on the Southern Plains thanks to signs the boxed beef market may have put in a low.
  • Yesterday, Choice values firmed $1.57 and Select rose 71 cents and movement was solid at 183 loads. This followed a strong start to the week on Monday.
  • But as packers have not yet placed bids, it appears late-week trade is likely. Negative cutting margins and slightly higher showlists this week add some uncertainty.
  • Plus, nearby futures contracts are already at a premium to last week's cash trade.
  • Buying interest in both live and feeder cattle futures is being limited by strength in the U.S. dollar index this morning.
  • But some feeder cattle contracts are benefiting from softer corn prices.

 

Lean hog futures are moderately lower this morning.

  • The slide in the pork continued yesterday as the pork cutout value fell $1.62, though this did encourage strong movement.
  • These declines have pulled packer cutting margins deep into the red. Thus, this raises concerns about both consumer and packer demand for pork.
  • But hog supplies continue to contract. The average hog weight for Iowa and southern Minnesota fell 1.1 lbs. last week from the week prior.
  • Thus, early cash hog bids are mostly steady, despite negative cutting margins.
  • Pressure on nearby contracts is being limited by slight discount they hold to the cash index.

 

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