Market Snapshot, 10:00 am CT (VIP) -- January 2, 2013

January 2, 2013 04:06 AM
 

Corn futures are posting gains of 1 to 3 cents in most contracts this morning.

  • Focus across the marketplace is on adding risk after to start the new year after lawmakers reached an 11th hour agreement to avoid the fiscal cliff. This bullish enthusiasm has pushed the Dow Jones Industrial Average 250-plus points higher. The U.S. dollar index is under pressure and crude oil futures are sharply higher.
  • Nearby contract's upside gap through resistance at $7.00 also triggered some light technical buying. But the market's struggle to find sustained buying above this level reminds of lackluster export demand.
  • Gulf basis levels are steady this morning, signaling fresh export demand remains lacking.

 

Soybean futures gapped higher on the open to post gains in the teens, but the market has since backed off these levels to trade around 2 to 5 cents higher.

  • In addition to relief the fiscal cliff has been avoided, funds are expected to pump fresh money into the long side of markets after liquidating long positions to close out 2012.
  • Also, news China's purchasing managers' index showed a third straight month of expansion signals its economy remains on the mend and thus, the country will likely remain a major source of demand for U.S. commodities.
  • But favorable growing conditions in Brazil and the start of the new year remind traders that a record-large South American bean crop will soon compete against U.S. supplies.
  • Limiting strength in the soy complex is the unwinding of long-meal/short-soyoil spreads. The fiscal cliff package included a biodiesel tax credit covering all of 2012 and 2013, which is expected to increase soyoil demand in the year ahead.

 

After posting slight gains this morning, wheat futures have softened to post losses around 2 to 5 cents in most contracts at all three locations.

  • Early gains amid relief lawmakers reached a last-minute agreement to avert the fiscal cliff has given way to light profit-taking.
  • Encouraging of this was a reminder that India plans to export 2.5 MMT of wheat recently released from government stocks in the next five to six months.
  • Also, winter wheat conditions have improved slightly on the Northern Plains, though conditions elsewhere continue to deteriorate.

 

Live cattle futures are slightly to moderately higher with the exception of the April contract, which is marginally lower. Feeder cattle futures are slightly higher.

  • Expectations for cash cattle trade to take place above last week's mostly $127 are building. The boxed beef market is off to a solid start and showlist estimates are slightly smaller than week-ago.
  • Plus, aversion of the fiscal cliff has boosted consumer and trader attitudes, sending the stock market screaming higher and adding to the positive tone.
  • Also, supplies are expected to tighten this year, boosting prices to a 10-year cycle high. This will continue to limit selling interest in live cattle.
  • Gains in feeder cattle futures are being limited by strength in the corn market.

 

February lean hogs are under light pressure, while deferred months are mostly slightly higher.

  • Lean hog futures are benefiting from highly supportive outside markets and bullish enthusiasm after lawmakers reached a deal on the fiscal cliff, averting (for now) economic strife.
  • Also, the pork cutout value rose $1.07 Monday and movement was solid at 73.58 loads.
  • But buying interest is being limited by the $3-plus premium February futures hold to the cash hog index.
  • Early cash hog bids are steady to firmer as some packers are catching up after back-to-back weeks of holiday-shortened kill schedules.
  • Buying interest is being limited by a 2.2-lb. increase in average hog weights in Southern Minnesota and Iowa for the week ended Dec. 29. Also, packer profit margins remain in the red.
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