Market Snapshot, 10:00 a.m. CT (VIP) -- May 23, 2013

May 23, 2013 05:00 AM
 

Corn futures opened the day session under pressure, but this has given way to some light short-covering. Futures are mixed with a downside bias.

  • Spillover from soybeans and wheat along with sharp weakness in the U.S. dollar index is limiting selling interest and encouraging some light short-covering this morning.
  • Plus, cool, wet conditions in the Corn Belt are keeping farmers out of the field and more showers are expected for much of the region this weekend and next week. This adds to ideas some corn acres will be switched to beans or other crops.
  • This morning's weekly export sales tally came in at the upper end of expectations with sales of 104,600 MT for 2012-13 and 341,600 MT for 2013-14.
  • Gulf basis firmed a penny for immediate delivery and fell 5 cents for early June delivery.

 

Soybean futures have rallied to trade 5 to 13 cents higher in old-crop and narrowly mixed in new-crop.

  • Soybean futures are benefiting from another dose of demand news today, with strong new-crop sales heightening concerns about a limited supply of old-crop beans.
  • Net weekly export sales topped the 1 MMT mark today, with sales of 183,500 MT for 2012-13 and 838,900 MT for 2013-14. This topped expectations by a wide margin and nearly tripled the week prior's tally.
  • Also this morning, USDA announced a daily sale of 115,000 MT of soybeans to China for 2013-14.
  • This is overshadowing disappointing Chinese manufacturing data. The nation's flash purchasing manager's index reflected contraction in the sector for the first time since October.
  • Buying interest in new-crop futures is being kept in check by expectations for some growers to switch corn acres to beans due to persistent wet weather.
  • Gulf basis slid 15 cents for immediate delivery this morning, reflecting increased farmer selling.

 

Wheat futures have rallied to post double-digit gains in Chicago, while Kansas City and Minneapolis wheat are roughly 7 to 10 cents higher.

  • Dollar weakness and spillover from soybeans is making it easy for wheat futures to rally today around rumors China may be buying U.S. wheat.
  • Also, this morning's weekly export sales of 239,400 MT for 2012-13 and 713,600 MT for 2013-14 topped expectations by a wide margin. Strong exports are especially impressive considering recent dollar strength.
  • The National Drought Monitor reflects little change in drought in Kansas, but it shows expansion of drought in wheat areas of Oklahoma and Texas. This keeps HRW crop concerns in traders' minds.

 

Live cattle futures are enjoying slight gains this morning. Feeder cattle futures are posting moderate losses in most contracts.

  • Live cattle futures are enjoying some corrective short-covering this morning as traders view yesterday's selloff as overdone in reaction to lower cash cattle trade at $124 in Texas, Oklahoma and Kansas, especially as nearby futures are at a $3.50-plus discount to these prices. Northern feedlots have held out in hopes of better prices.
  • Lower trade was a surprise to some, as Choice boxed beef values continue to surge to all-time highs and movement improved notably yesterday. Plus, packers are enjoying very wide profit margins.
  • Recent slow movement has kept demand concerns in mind as traders view high beef prices as unsustainable, though the beef price rally has yet to show signs of fading.
  • Also, weekly beef exports surged the week ended May 16 to 24,400 MT, up 15,700 MT from the week prior.
  • Light support also comes from yesterday's Cold Storage Report, which showed a slight drawdown in stocks for April from the month prior to 510 million pounds.
  • Strength in the corn market is weighing on feeder cattle futures.

 

Lean hog futures opened slightly lower but have turned narrowly mixed.

  • Traders are taking advantage of yesterday's strong gains by booking some profits, but have turned mixed.
  • Yesterday's Cold Storage Report adds profit-taking incentive as it showed stocks above expectations at a monthly and all-time record of 698.8 million pounds. Futures are actually holding up quite well in the face of such bearish data.
  • But ongoing improvement in the pork market is pressuring lean hog futures. Yesterday, the pork cutout value firmed 40 cents and movement improved to a strong 441.8 loads.
  • Pork strength has pulled packer profit margins solidly into the black, but cash hog bids are mostly steady as packers are preparing for a very light weekend kill and a holiday-shortened week.
  • But weakness in the U.S. dollar index is limiting pressure.
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