Market Snapshot, 10:00 am CT (VIP) -- January 6, 2014

January 6, 2014 04:08 AM
 

Corn futures continue to enjoy gains of mostly 1 to 3 cents this morning.

  • Light short-covering is lifting corn futures to start the week. Mild weakness in the U.S. dollar index and spillover from soybeans provide support.
  • Support stems from USDA's announcement that Mexico has purchased 110,600 MT of U.S. corn for 2013-14.
  • Light support also stems from ideas cold temps will increase feed demand from livestock producers working to prevent weight loss.
  • But on the other hand, gains are being limited by a reminder of recent Chinese rejections. Xinhua news agency reports the he country rejected a total of 601,000 MT of corn and corn by-products from the U.S. in 2013 due to the presence of an unapproved GMO trait.
  • Long-only index funds are rebalancing their portfolios to start the new-year, which is likely to influence price action this week.

 

Soybean futures have improved to trade 2 to 7 cents higher through the July contract, with the lead-month January contract leading gains. Far-deferred months are steady to marginally lower.

  • Traders have returned from what was an extended holiday break for many with bullish attitudes. Light bull spreading is pressuring far-deferred contracts.
  • While South America is expected to grow a record-large bean crop, there are concerns about forecasts for dry weather and warmer temps this week for Argentina.
  • Plus, demand for U.S. soybeans and soy products remains strong.
  • Traders are not overly concerned about confirmation of two new human cases of the H7N9 bird flu in China over the weekend as Chinese officials are saying the risk of widespread outbreak is low.
  • Ideas the downside was overdone last week are also encouraging some corrective short-covering to start the week. Thus far, the January soybean contract has had a tough time finding sustained buying interest above $13.00.

 

Wheat futures are mostly 3 to 7 cents higher, with nearby HRW contracts leading gains.

  • Extreme cold in the Midwest and Plains raise concerns about winterkill, especially as snowcover in some areas is "patchy." Also, hard freeze warnings are in effect as far south as Texas and the Gulf coast.
  • The market is also benefiting from ideas feed demand will increase among livestock producers as a result of frigid temps.
  • Corrective short-covering is also supportive, as a number of contracts were in oversold territory according to the Relative Strength Index last week.
  • Also supportive is USDA's announcement that 160,000 MT of U.S. wheat was sold to an unknown buyer for 2014-15. Of the total, 128,000 MT is HRW and 32,000 MT is SRW.
  • Light support also stems from Egypt's largest wheat buy (535,000 MT) since 2010 last week. While the U.S. did not garner any of the business, the purchase supports ideas the country will continue to up its buys this year.

 

Live cattle futures are steady to slightly higher to start the week. Feeder cattle futures are slightly to moderately higher in early trade.

  • Live cattle futures have seen some light profit-taking at times this morning as traders look to take advantage of last week's bullish breakout, but highly stressful weather has caused most to favor the upside.
  • Record-setting cash cattle trade took place mostly at $137 last week in the Southern Plains, with even higher prices being seen in Nebraska.
  • Arctic temps in the Midwest and Plains are stressing cattle in feedlots. The fact that this follows frigid temps last week compounds the situation.
  • Plus, supplies are expected to tighten going forward as producers retain cattle for herd rebuilding.
  • But traders remain concerned about the sustainability of high cash and futures prices, especially with lofty boxed beef prices slowing movement. On Friday, a $1.86 surge in Choice cuts to $202.41 per cwt. and a $1.33 gain in Select values to $197.38 per cwt. slowed movement to 115 loads.
  • Live cattle have moved into overbought territory according to the Relative Strength Index, which signals a time or price correction is due. This is also limiting buying interest.

 

Lean hog futures are posting slight losses this morning.

  • Lean hog futures are facing mild profit-taking to start the week amid uncertainty about near-term price direction. Traders remain on watch for signs of a seasonal low. While cash hog index has firmed in recent sessions, the pork market has struggled to put in a low.
  • Dangerously cold weather across the Midwest along with some snow and ice are halting hog transportation to start the week. As a result, cash hog bids are steady to higher as plants are having a difficult time securing needs.
  • At least two processing plants reported they will remain closed or operate at heavily reduced kill hours today due to the bitter cold.
  • But the pork cutout value fell 62 cents on Friday and movement was decent at 384.44 loads. Recent declines in the pork cutout value have tightened packer profit margins.
     
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