Market Snapshot, 10:00 am CT (VIP) -- March 12, 2014

March 12, 2014 05:12 AM
 

Corn futures faced pressure overnight and initially this morning, but the market has since improved to post gains of 1 to 3 cents.

  • Spillover from strong gains in the wheat market have helped corn futures reverse course.
  • Light support stems from news Brazil's Conab has reduced its peg of the country's corn crop by 290,000 MT to 75.18 MMT.
  • Uncertainty surrounding the situation in Ukraine is also mildly supportive as importers have signaled they will favor more reliable suppliers such as the U.S. to meet near-term needs.
  • Gulf corn basis slipped a penny for March and April delivery while May ticked up 4 cents.
  • Traders are brushing off news ethanol production declined 25,000 barrels per day (bpd) to 869,000 bpd the week ended March 7, the lowest level of the year. Ethanol stocks fell 703,000 barrels to 15.91 million barrels.

 

Soybean futures are 30-plus cents lower in old-crop contracts while September is around 20 cents lower and new-crop beans are posting losses around 15 to 17 cents.

  • Rumors that China has canceled some of its Brazil bean buys and speculation that some of the shipments may be diverted to the U.S. is a major source of pressure today.
  • Violation of key support has also triggered some technical-based selling. May soybean futures violated the uptrend from the late-January low and plunged through the key $14.00 level today.
  • The market is also being pressured by spread unwinding. In addition to unwinding of bull spreads in soybeans, traders are also unwinding long soybean/short corn spreads.
  • Traders are brushing off news Brazil's Conab slashed its forecast for the 2013-14 soybean crop by 5% to 85.44 MMT, citing adverse growing conditions.
  • Today's downside breakout is a signal a near-term top is in place.

 

Wheat futures are surging this morning with all three flavors posting double-digit gains. SRW futures are leading the way.

  • U.S. crop concerns, unrest in Ukraine and money flowing out of beans are lifting wheat today. Early gains triggered buy stops.
  • Global grain traders say French wheat is likely to replace Black Sea wheat if tensions slow shipments in the region. But traders are also optimistic this could shift some business to the U.S.
  • Meanwhile, the Southern Plains is still dealing with drought as the winter wheat crop starts exiting dormancy.
  • Traders are discounting news that Russia's Agriculture Minister has raised his forecast for the country's 2013-14 grain exports by 2 MMT to 22 MMT.
  • FranceAgriMer raised its 2013-14 French wheat ending stocks forecast by 350,000 MT to 3.2 MMT due to lower exports.

 

Live cattle futures are off to a narrowly mixed start. Feeder cattle futures are slightly higher.

  • Live cattle futures are favoring the upside in mixed trade as nearby contracts remain at a hefty discount to last week's cash trade and fundamentals remain bullish.
  • Choice cuts surged $2.57 to a new high of $241.47 per cwt. yesterday and Select jumped $1.72 to $237.71 per hundredweight. Movement was again light at 106 loads.
  • The combination of last week's lower cash cattle trade and the record-setting rally in the product market have pulled packer profit margins into the black. They are now estimated at $22.55 compared to -$48.00 last week, according to HedgersEdge.com.
  • There is hope this along with tighter showlist estimates will help feedlots to get at least steady cash prices of $148 in the Southern Plains and $150 in Nebraska.
  • Firmer corn prices are limiting buying interest in feeder cattle futures this morning.

 

Lean hog futures are slightly to sharply lower this morning, with far-deferred contracts leading to the downside.

  • Lean hog futures are facing profit-taking today as traders look to take advantage of yesterday's runup to new contract highs. Traders are also working to correct the severely overbought condition of the market.
  • And the market remains on watch for signs a top is in place. However, traders are aware the market has not yet given any such technical signals and previous pullbacks have been followed by strong buys.
  • However, fundamentals remain supportive today.
  • Cash hog bids are higher again today as packers are facing winter weather disruptions in some areas of the Corn Belt . Plus, strong packer profit margins keep demand high.
  • Average hog weights in Iowa and southern Minnesota ticked up 0.3 lb. to 282.1 lbs. the week ended March 8, but head counts declined by 5,000 from week ago to 392,000 head. This compares to head counts of 420,000 last year, reminding of the impact of the porcine epidemic diarrhea virus.
  • Also, the pork cutout values surged $2.91 yesterday to rise to a new record of $116.46. Movement was decent at 338.01 loads.
     
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