Corn futures have extended early gains to trade mostly 1 to 8 cents higher.
- Traders are covering short positions ahead of this morning's 11:00 a.m. CT release of USDA's February Supply & Demand Report.
- No major surprises are expected. Traders expect USDA to raise corn carryover by around 13 million bu. to 615 million bu. from last month due to lackluster demand.
- South American production estimates will also be in focus. The market expects USDA to cut its Argentine corn production tally from 28 MMT to 26.6 MMT, but for it to raise its Brazil corn production estimate a touch from 71 MMT in January to 71.1 MMT.
- Light support also comes from diminished rain coverage and amounts expected early next week in Argentina, though there are some late-week rain chances.
- Gulf corn basis is steady to 1 cent higher for nearby delivery, reminding of tight supplies.
Soybean futures have softened to trade fractionally to 9 cents lower in all but the front-month contract, which is slightly higher.
- Traders are booking profits ahead of USDA's S&D Report. The report is expected to reflect strong soy demand, with USDA trimming its carryover estimate by 6 million bu. to 129 million bushels.
- Traders also expect USDA to trim its Argentine soybean production estimate by 1 MMT to 53 MMT. But they also expect USDA to raise its Brazilian production estimate by 0.6 MMT to 83.1 MMT.
- A reminder of strong Chinese soy demand is also limiting selling interest this morning. Official customs data shows Chinese soybean imports in January were down 18.8% from the previous month, but up 3.8% from year-ago levels.
- But with Brazilian supplies expected to soon hit the export market and the Chinese Lunar New Year festivities set for next week, demand could fade in the near-future.
- Countering this is firmer Gulf basis for all months this morning, including a 3-cent rise for immediate delivery. This signals someone, likely China, is buying U.S. beans after the recent price dip.
Wheat futures have improved to trade double-digit higher at all three locations.
- Wheat futures have assumed an atypical leadership role this morning as traders are viewing the market's downside as overdone. A weaker U.S. dollar index is encouraging short-covering.
- Traders expect USDA to raise its carryover estimate slightly from last month to 728 million bushels.
- Light support also comes from news India's 2012-13 wheat crop is expected to slide 2.7% to 92.3 MMT after a record crop the previous year. Countering this is the country's preparation to up its wheat exports.
Live cattle futures got off to a firmer start, but they have since softened to slightly lower trade. Feeder cattle futures are moderately lower.
- Traders continue to wait for cash cattle trade to begin, oscillating between short-covering and profit-taking. Tightening supplies and improvement in boxed beef prices this week has most expecting steady to firmer trade.
- But as futures are already several dollars above last week's $125 trade on the Southern Plains, upside potential is limited.
- Also, boxed beef prices have been choppy in recent days, which has done little to improve negative packer profit margins. This could make steady cash trade more likely.
- Selling interest in live cattle futures is also being limited by news U.S. beef from cattle aged under 30 months is ready to be shipped to Japan following its easing of import restrictions.
- Feeder cattle futures are being pressured by followthrough selling and strength in the corn market.
Lean hog futures are mixed with nearby futures slightly higher and deferred contracts steady to slightly lower.
- Nearby lean hog futures are benefiting from the nearly $3 discount they hold to the cash hog index with less than a week to go to the February contract's expiration.
- But the rest of the market is under pressure due to concerns about pork demand.
- The pork cutout value slipped another 72 cents yesterday, but movement improved to 106.83 loads. The pork cutout value has fallen $5.12 so far this week.
- This has pulled packer profit margins deep into the red, encouraging them to reduce kill hours and to toe the line on cash hog prices. Cash hog bids are steady to lower today.