Corn futures have improved to post slight gains in most contracts.
- Weak export demand continues to make traders hesitant to add risk in the corn market despite an unfavorable forecast for South America this week.
- But the soybean market's move into positive territory returned some short-covering to corn.
- Tight supplies are also limiting downside risk for corn. On Friday, Poet LLC, a large U.S. ethanol producer, announced it would suspend production due to limited corn supplies. Employees will continue to work normal hours during this period, however.
- Also speaking to tight supplies, Gulf corn basis firmed 2 cents for February delivery this morning.
Soybean futures improved with the start of open outcry to trade mostly 2 to 3 cents higher.
- The start of open outcry trade shifted some attention to supportive fundamental news.
- For one, some forecasts for central Brazil and southern Argentina call for unfavorably hot and dry conditions this week, though other models are more favorable.
- Plus, the stream of daily bean sales to China continued today. The country purchased 220,000 MT of U.S. soybean for 2013-14.
- Traders expect the strong demand story for soy to be reflected by this morning's Weekly Export Inspections Report.
Wheat futures have softened to post 1 to 2 cent losses in Chicago and Kansas City, while Minneapolis wheat is choppy.
- Rain chances for the U.S. Southern Plains have given bears a slight advantage in the wheat market today.
- But downside risk remains limited by global supply concerns. The most recent news on that front is that Russia's grain exports have slowed notably since December due to tightening domestic supplies. Indeed, there was talk last week Russia may consider lifting its grain import duty.
- Countering this, however, is news favorable weather in Ukraine could increase its winter grain output 20% to 30%.
Live and feeder cattle futures gapped higher on the open and are enjoying sharp gains in most contracts.
- Cattle futures are benefiting from both supply and demand news this morning.
- Friday's Cattle on Feed Report showed On Feed and Placements at tighter-than-anticipated levels that were below year-ago. Marketings also came in below last year but above expectations.
- News U.S. Trade Representative Ron Kirk and USDA Secretary Tom Vilsack today announced the U.S. and Japan have agreed on new terms that pave the way for expanded exports of U.S. beef and beef products to Japan is also giving futures a boost. Beginning Friday, Japan will accept beef from cattle aged less than 30 months, compared to the current limit of 20 months.
- This is more than offsetting disappointing softness in boxed beef prices Friday and most of last week. Movement also slowed Friday to just 154 loads.
- Weaker corn prices are also encouraging short-covering in feeder cattle.
Lean hog are slightly to moderately higher this morning.
- Hog supplies are tightening seasonally and icy roads in the Midwest will make market-ready hogs even harder to obtain.
- Spillover support from strong gains in the live cattle market is also supportive.
- As a result, the cash market is expected to be steady to firmer again today despite negative profit margins.
- February lean hogs are at around a $1 discount to the cash hog index, which is also providing light support.
- The pork cutout value rose 41 cents Friday, though and movement slowed to 65.38 loads.
- But futures' upside potential will remain limited until packers' profit margins move back into the black.