Market Snapshot, 10:00 a.m. CT (VIP) -- January 22, 2013

January 22, 2013 04:02 AM
 

Corn futures trimmed gains to just 2 to 3 cents with the start of pit trading.

  • Corn futures are benefiting from dryness concerns in Argentina. A very wet planting season means much of the crop has a shallow root system. Thus, the crop is ill-equipped to handle recent dryness.
  • Also encouraging light short-covering, the U.S. dollar index is under pressure to start the trading week after Japan announced aggressive monetary easing to improve its economy.
  • Light support also comes from recent freeze damage to the Mexican corn crop. This could boost the country's import needs.
  • Buying enthusiasm remains limited by lackluster exports. Gulf basis was down 1 cent for February delivery, up a penny for March and steady for other delivery months this morning.

 

Soybean futures have improved to post gains in the upper teens to low 20s.

  • Traders returned to the soy complex after an extended holiday weekend with a risk-on attitude, partially thanks to a weaker U.S. dollar index.
  • The market is building some more weather premium into prices as dryness built over the weekend for Argentina and southern Brazil and the 10-day forecast does not call for widespread showers.
  • Support also stems from improving export demand. USDA this morning announced a daily sale of 120,000 MT of optional-origin soybeans to China for 2013-14.
  • But the start of harvest in northern areas of Brazil will keep bullish enthusiasm in check as it means the U.S. will soon face stepped-up export competition. Gulf basis slid 2 cents for immediate delivery this morning.

 

Wheat futures softened with the open of pit trading to post slight losses in most contracts.

  • Early gains in the wheat market this morning encouraged profit-taking.
  • Pressure on Minneapolis wheat is being limited by concerns about sub-zero temps in the upper Midwest.
  • Selling interest in wheat futures is also being limited by a dry five-day and 6 to 10-day forecast for the Southern Plains. This encouraged managed funds to trim their net short position last week.
  • Talk that Russia may lift grain import duties is also limiting pressure as doing so could boost demand for U.S. wheat. The country's prime minister has signaled he does not support this move, however.
  • Steady to 5 cents higher Gulf basis levels could signal export demand for U.S. wheat is improving. But considering the long wait for this to occur, traders will need "proof" before they will aggressively add long positions.

 

Live cattle futures are enjoying slight to moderate gains with nearbys leading to the upside. Feeder cattle futures are slightly higher.

  • Cattle futures are receiving a boost from reports from Kyodo News that Japan's government will soon ease its beef import restrictions for the U.S. and Canada to cattle aged up to 30 months, compared to the current 20-month age restriction.
  • This plus a lower U.S. dollar index is encouraging short-covering on ideas the downside was overdone last week.
  • In addition, bitter cold in the Midwest over the weekend and to start the week is thought to be stressing livestock.
  • Support also comes from showlists that are estimated to be down 33,000 head from week-ago.
  • But somewhat offsetting this supportive news is heavy declines in boxed beef prices Friday, though movement was solid at 194 loads. Boxed beef prices must stabilize to prevent another week of lower cash trade.
  • Feeder cattle futures are enjoying corrective short-covering on ideas the downside was overdone, but firmer corn prices mean that is the extent of buying interest.

 

Lean hog futures are posting slight losses in early trade.

  • Producers are dealing with negative cutting margins and this is a holiday-shortened week for many plants. This is encouraging light profit-taking to start the week.
  • Traders continue to closely monitor the product market for signs of improved demand. Friday's action did not fit the bill as the pork cutout value slid 25 cents and movement slowed to 68.71 loads.
  • Frigid temps in the Midwest are making producers reluctant to bring hogs to market. Plus, supplies are already tightening seasonally and hog weights are on the decline. Early cash hog bids are steady to firmer as a result, limiting selling interest in futures.
  • A softer U.S. dollar index is also limiting pressure.
  • Traders are also readying positions for this afternoon's Cold Storage Report. It is is expected to show frozen pork supplies as of Dec. 31 at 527 million lbs., which is up 8.8% from last year but down 5.5% from the previous month.
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