Market Snapshot, 10:00 am CT (VIP) -- January 15, 2014

January 15, 2014 04:09 AM
 

Corn futures are around 3 cents lower in most contracts this morning.

  • Timely rains in Brazil are spurring talk the country's corn crop may be even larger than anticipated. This is overshadowing drought concerns in Argentina.
  • After the initial bullish reaction to USDA's reports, traders have come around to the idea that supplies are still ample. Thus, the report data is enough to keep a floor under the market, but not enough to spur active buying.
  • Reports China has rejected more U.S. DDGs due to the presence of unapproved GMO material is also weighing on the market. This reignites concerns after China last week indicated it would relax inspections of U.S. DDGs. However, amounts and confirmation of these rejections remains absent.
  • Ethanol production for the week ended Jan. 9 declined 51,000 barrels per day (bpd) to 868,000 bpd. Ethanol stocks fell 60,000 barrels to 16.08 million barrels.
  • Gulf corn basis slid a penny for immediate and April delivery, possibly indicating a softening of demand.

 

Soybean futures are mixed with March through August futures 3 to 9 cents higher and deferred months 1 to 3 cents lower.

  • Soybean futures are seeing some bull spreading activity this morning.
  • While nearby contracts are benefiting from a stressful forecast for Argentina, deferred months are being pressured by expectations for larger soybean plantings in 2014.
  • Some private crop watchers have lowered their Argentine soybean production estimates due to heat and dryness in the country this week and in weeks past.
  • Light support for nearby contracts also comes from a reminder of strong soybean demand. USDA announced a 106,000-MT bean sale to China for 2014-15.
  • Traders are expect this morning's NOPA soybean crush data to reflect strong demand, with crush expected to total 163.9 million bu. in December, which would be up from 160.145 million bu. in November and 159.899 million bu. last year.

 

Wheat futures are under pressure with the SRW market 4 to 6 cents lower and the HRW and HRS markets seeing slightly lighter losses.

  • Wheat futures are seeing profit-taking today after recent mild gains. Spillover from corn adds pressure, as does steep gains in the U.S. dollar index.
  • The market is not overly concerned about above-normal temps, high winds or limited precip in the forecast for the Plains as the crop entered dormancy in good shape.
  • However, early state crop condition updates have reflected deterioration in ratings. Texas, for example, saw a 10-percentage-point increase in the amount of wheat rated "poor" to "very poor" since the last condition update in late November.
  • Light pressure also stems from news India's farm ministry expects its wheat crop to top 100 MMT. If realized, it would be a record.
  • Gulf SRW wheat basis slid 5 cents for immediate delivery this morning, possibly reflecting a pullback in demand.

 

Nearby live cattle contracts gapped higher on the open and are enjoying moderate gains; deferred months are slightly higher. Feeder cattle futures are moderately higher.

  • Traders are finally beginning to accept that a top may not yet be in the cash market, as the boxed beef market continues to surge and showlists are notably tighter this week.
  • Choice boxed beef values have surged $13.73 since week-ago to stand at $221.04 per cwt. Tuesday. Select values have surged an even more impressive $15.79 since week-ago to $219.35 per hundredweight.
  • And despite $4-plus gains in both cuts yesterday, movement was decent at 144 loads.
  • Product market strength along with tighter showlists in most locations should give feedlots the upper hand in cash negotiations.
  • Plus, recent product market gains have pulled packer profit margins into the black for the first time in an extended period. Just last week, margins were estimated around $100 in the red.
  • Last week, sales took place mostly in the $139 to $140 vicinity. Traders have narrowed the gap the front-month contract holds to the lower end of cash prices to around 50 cents.
  • The front-month hit a new contract high this morning.
  • Weaker corn prices and additional short-covering after Monday's downside break are lifting feeder cattle futures.

 

Lean hog futures gapped higher on the open and are enjoying moderate gains. Far-deferred months are slightly higher.

  • Traders are engaging in followthrough buys thanks to spillover from live cattle and improvement in the product market.
  • The pork cutout value firmed $1.65 yesterday and movement was a strong 471.94 loads. This has spurred some optimism the record-shattering runup in beef prices is helping the pork market put in a seasonal low.
  • Meanwhile, cash hog bids are steady to lower today as packers are having no trouble securing supplies and weather has improved.
  • Average hog weights in Iowa and southern Minnesota declined 0.3 lb. last week, but the estimated head count rose by nearly 20,000 from the week prior. However, hog numbers are estimated down 32,000 head from year-ago.
  • Traders are widening the already significant premium February futures hold to the cash hog index, signaling friendly cash market expectations.
     
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