Market Snapshot, 10:00 am CT (VIP) -- February 7, 2013

February 7, 2013 04:09 AM
 

Corn futures have softened slightly to trade 5 to 9 cents lower.

  • Traders were reminded of lackluster corn demand by this morning's Weekly Export Sales Report from USDA. Sales of 168,900 MT for 2012-13 and net sales reductions of 8,500 MT for 2013-14 met low expectations.
  • This added to ideas USDA will raise its corn carryover estimate in tomorrow's Supply & Demand Report due to slower ethanol and export demand.
  • Pre-report expectations are USDA will peg carryover at 615 million bu., which would be up 13 million bu. from last month, but down 374 million bu. from year-ago.
  • Gulf basis firmed a penny for immediate and April delivery this morning, but softened one cent for May shipment.

 

Old-crop soybean futures briefly firmed, but have since softened again. New-crop months are 6 to 10 cents lower.

  • This morning's weekly export sales data again reflected red-hot soybean demand, especially from China. Sales of 896,200 MT for 2012-13 and sales of 771,000 MT for 2013-14 were well above lofty expectations.
  • Export sales of soy products remain well above the pace needed to reach USDA's most recent 2012-13 export forecast. The pace of soymeal and soyoil exports are running 43% and 24%, respectively, ahead of year-ago.
  • Also encouraging light short-covering in nearby contracts is some weather model updates that scale back coverage amounts and totals of the precip event in Argentina. Some also push back the date of the precip event.
  • Countering this, however, are expectations Brazil will still produce a record-large crop. Conab, Brazilian equivalent of USDA, raised its Brazilian soybean forecast to a record 83.4 MMT.
  • Traders are also readying for tomorrow's USDA S&D Report, which is expected to reflect strong soy demand. Pre-report expectations are for USDA to trim its carryover estimate by 6 MMT to 129 MMT. This is down 40 MMT from last year.

 

Chicago wheat futures are 6 to 11 cents lower, with Kansas City wheat mostly 6 to 7 cents lower, while Minneapolis wheat is 2 to 5 cents lower.

  • Wheat futures moved off their lows as nearby soybean futures briefly firmed, but have softened again as buying interest in soybeans has faded.
  • Limiting selling interest are statements by Russia's ag minister that the country may consider importing grain to ease tight government intervention stocks if prices are attractive.
  • But heavy rains totaling 2 to 4 inches for the southern U.S. are making it tough for wheat to find buyers today.
  • And while weekly export sales of 290,800 MT for 2012-13 and 10,000 MT for 2013-14 met the low-end of expectations, the total did not signal export demand is improving as bulls had hoped.
  • Traders are also reducing their risk exposure ahead of tomorrow's USDA S&D Report. Traders expect USDA will raise carryover by around 12 million bu. to 728 million bushels.

 

Live cattle futures are off to a slightly lower start. Feeder cattle futures are slightly to moderately lower.

  • Traders are waiting for cash cattle trade to begin. Cash trade is expected to take place at at least steady prices compared with last week's $125 trade in the Southern Plains. But as initial bids are $2 below those prices while asking prices are $2 above week-ago, trade may not get started until Friday.
  • Supplies are tightening seasonally, but packers have trimmed their kill hours to improve negative cutting margins.
  • Choppy boxed beef prices yesterday raised concerns the market may not have put in a low yet. Traders will watch today's boxed beef action closely for more insight.
  • Light pressure also stems from a slowdown in weekly beef export sales in recent weeks. Today's total of 9,700 MT was down 2,400 MT from the week prior.
  • Feeder cattle futures are facing followthrough selling today as the market has taken out key levels of support this week.

 

Lean hog futures are steady to slightly lower this morning.

  • Another steep decline ($1.75) in the pork cutout value yesterday added to concerns about both consumer and packer demand.
  • The recent price slide has pulled cutting margins deep into the red. Until these improve, cash hog demand will likely remain limited. Cash hog bids are steady to lower this morning.
  • Pressure on the February contract is being limited by the $3-plus discount it holds to the cash hog index, which continues to rise.
  • With the exception of the front-month contract, lean hog futures have posted a major downside breakout this week, encouraging technical selling, too.
     
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