The government's inability to agree on a plan of taxation and spending cuts is leading to a "risk-off" day in the markets. Investors say the level of uncertainty surrounding the impact on the U.S. and global economy to the "great sequestration" is high and is causing them to limit their risk exposure and see "safe haven" investments such as the U.S. dollar index, which is sharply higher this morning. Click here for more on the outside markets.
Corn futures improved with the open of pit trading to post gains of 1 to 2 cents in old-crop contracts. New-crop futures are posting slight losses.
- Fresh news is lacking this morning. Thus, traders are engaging in some light position evening ahead of the weekend.
- Signs of improved export demand in recent weeks is encouraging some light short-covering in nearby contracts. A 2-cent rise in Gulf basis for immediate delivery signals more export news may lie ahead.
- But the rest of the market is seeing light profit-taking encouraged by dollar strength, risk aversion and ideas production will recover in 2013-14.
- Recent precip in the Corn Belt with more in the forecast early next week is adding light pressure to new-crop corn futures.
Soybean futures also improved with the open of pit trading to trade "just" 4 to 6 cents lower in old-crop futures and mixed with a downside bias in new-crop futures.
- Dollar strength and sequester-related risk aversion is encouraging profit-taking in soybean futures ahead of the weekend.
- Plus, the likelihood South American bean supplies will soon come available is limiting buying interest in old-crop soybeans.
- However, China's string of new-crop soybean buys continued this morning as it purchased 120,000 MT of soybeans for 2013-14 delivery. This brings China's total new-crop bean buys for the week to 483,000 MT.
- Gulf basis firmed a penny for immediate delivery this morning, signaling more demand news may be ahead. Basis strength around the country indicates very tight carryover supplies.
Wheat futures have improved with the start of the open outcry session. Chicago and Kansas City wheat futures are now 2 to 4 cents higher in nearby contracts, while Minneapolis wheat is mostly 4 to 12 cents higher.
- Traders view the downside was overdone in the wheat market during February. Thus, they are engaging in some short-covering to start March and ahead of the weekend.
- Recent signs U.S. wheat prices are finally competitive is encouraging of this, as is recent reminders of tight supplies.
- Today the Home Grown Cereals Authority said that soggy soils in recent months means 10% of the UK's winter wheat crop could fail.
- Countering this, however, is news Ukraine will begin exporting wheat in April as it will have around 2 MMT of exportable supplies in positions by then.
- Also, China will sell 1.285 MMT of wheat next week to cool domestic prices.
Live cattle futures are enjoying slight gains in most contracts. Feeder cattle futures are enjoying slight to moderate gains.
- Live cattle futures are being supported by yesterday's moderately active cash cattle trade at $3 to $4 higher prices relative to the week prior at mostly $128 to $129.
- Packers were forced to pay up for supplies as slaughter weights were light due to the winter storm event this week and boxed beef prices have recently rebounded as spring grilling season approaches.
- Yesterday, Choice boxed beef prices rose 59 cents and Select cuts firmed 89 cents. Movement did slow, however, to just 148 loads.
- Gains are being kept in check due to uncertainty about the sequesters' affect on the economy as well as how the meat inspector furlough will play out in the weeks ahead.
- Feeder cattle futures are benefiting from corrective short-covering as well as weakness in the corn market.
Lean hog futures are enjoying slight to moderate gains this morning.
- Lean hog futures are benefiting from some light short-covering amid ideas the downside has been overdone this week. Most contracts are technically oversold according to the 9-day Relative Strength Index.
- But that is the extent of buying interest as cash hog demand remains lackluster despite profitable margins for packers.
- The pork cutout value softened 48 cents yesterday, and movement was relatively light at 55.25 loads. Traders remain concerned about the pork market's inability to put in a near-term low.
- Strength in the U.S. dollar index and concerns about pork demand overseas as China's manufacturing sector slowed in February and the ractopamine dispute with Russia and now China has yet to be resolved also remain limiting factors.