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

March 10, 2014 05:02 AM
 

Corn futures are fractionally to 4 cents lower in early trade.

  • Expectations for USDA to remind of ample old-crop corn carryover around 1.487 billion bu., up 6 million bu. from last month, is weighing on the market today.
  • While exports have been strong, the record-large 2013 crop along with lower feed use due to smaller-than-anticipated hog supplies and a historically tight cattle herd means supplies are plentiful.
  • Traders will also watch USDA's South American production estimates for insight as to U.S. export competition. Brazil had less than ideal late-season conditions. Traders expect USDA to peg the Argentine corn crop at 23.35 MMT and the Brazil crop around 69.03 MMT. If realized, both of these figures would be down slightly from February.
  • Mild strength in the U.S. dollar index along with spillover from the soybean market are also giving bears a slight advantage.
  • Gulf basis slid 1 to 2 cents for March through July delivery this morning, signaling increased farmer sales and/or slowed demand.

 

Soybean futures have softened to post losses of 12 to 21 cents in old-crop contracts, while new-crop futures are 7 to 9 cents lower.

  • A general move to reduce risk ahead of USDA's Supply & Demand Report along with disappointing Chinese economic data are weighing on the bean market to start the week.
  • Traders are also booking some profits after recent strong gains.
  • Traders expect USDA to trim old-crop soybean carryover by 9 million bu. from last month to 141 million bushels. However, there are some concerns USDA may counter any increases to its export projection with a similar cut to residual "use."
  • Traders also expect USDA to trim its South American production pegs. Pre-report expectations are for USDA to put the Brazil bean crop at 88.14 MMT and the Argentine crop at 53.5 MMT.
  • Also, a pullback in Chinese imports in February reminds that the nation's demand for U.S. beans typically slows in the months ahead. However, Chinese soybean imports of 4.81 MMT are still up 65.9% from the year prior.
  • China unexpectedly posted a trade deficit of $23 billion in February, whereas traders were expecting a trade surplus of $14.5 billion. But with inflation low, China has some flexibility to enact measures aimed at boosting economic growth.
  • Gulf soybean basis is up 3 cents for May delivery and 1 cent higher for August delivery, signaling still strong export demand.

 

Wheat futures have improved slightly to trade steady to 2 cents lower in most contracts of all three flavors. The exception is the March SRW contract, which is up 7 cents.

  • Traders are focused on position evening ahead of USDA's reports today.
  • They expect USDA to raise its old-crop wheat carryover estimate by around 10 million bu. from last month to 568 million bushels.
  • But ongoing political tensions have helped the wheat market to move off its overnight lows. However, any improvement to USDA's wheat exports due to conflict in the Black Sea region may not be reflected in today's reports.
  • Also, the U.S. has been benefiting from troubles getting a record-large Canadian wheat crop shipped. This is expected to improve in the weeks ahead.
  • Gulf HRW wheat basis held steady for near-term delivery, while March SRW wheat basis slid 2 cents and deferred delivery held steady.

 

Live cattle futures are mixed with nearby contracts steady and deferred months slightly lower. Feeder cattle are slightly higher.

  • While April live cattle are benefiting from efforts to narrow the nearly $5 gap the contract holds to last week's cash cattle prices in the Southern Plains, deferred contracts are seeing some mild profit-taking.
  • Signs that the market may be near or have put in a top are building as boxed beef movement has slowed notably, cash cattle prices pulled back last week and there was increased price volatility in cattle futures last week.
  • The combination of surging boxed beef prices and lower cash cattle trade last week has notably improved packer profit margins to $18.15 in the red versus negative $65.90 a week ago.
  • But the boxed beef market has shown signs the rally may be nearing a close. While Choice cuts firmed 44 cents on Friday, Select slipped 13 cents and just 82 loads changed hands.
  • Softer corn prices are helping feeder cattle futures to favor the upside.

 

Lean hog futures again gapped higher on the open and the April contract is again posting new highs. Most contracts are sharply higher.

  • Bulls have the advantage in the lean hog market to start the week as the fundamentals still favor them.
  • And while the uptrend remains untested, the Relative Strength Index continues to signal a major price or time correction is needed.
  • Demand for cash hogs remains strong despite some plant's decisions to reduce kill hours due to the porcine epidemic diarrhea virus (PEDV) tightening market-ready hog supplies.
  • Cash hog bids are mostly $1 higher to start the week.
  • Ideas PEDV will further constrict supplies as we head into spring and summer are also supportive.
  • The pork cutout value rose $1.55 on Friday to keep packers' profit margins in the black. However, movement slowed to 257.78 loads.
     
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