Market Snapshot, 10:00 am CT (VIP) -- October 10, 2012

October 10, 2012 05:05 AM
 

Corn futures continue to see very choppy trade, with most contracts currently favoring the downside.

  • Traders are unwilling to actively add either long or short positions ahead of tomorrow's USDA reports. Traders expect USDA to lower the corn crop peg and tighten carryover.
  • Gulf corn basis is 1 to 4 cents higher for nearby delivery, reflecting tight supplies.
  • But the market was also reminded of demand destruction today. Record Australian wheat exports in 2011-12 at the end of August and ongoing risk analysis by Mexico on alternative markets for buying corn signals end-users are seeking alternatives to U.S. corn.
  • Some spread trading activity with wheat is also pressuring the market as traders are adding short positions in corn and long positions in wheat.

 

Soybean futures have softened to post double-digit losses through the March contract, with far-deferred months mostly 5 to 8 cents lower.

  • Traders are reducing risk exposure ahead of USDA's reports tomorrow.
  • Pre-report expectations are for USDA to raise its production estimate and carryover projection from last month. But any such increase will likely be matched by an increase in USDA's export forecast, which could lead to a bullish surprise on carryover.
  • Export bookings for 2012-13 have already topped 80% of USDA's current forecast and end-user buying continues. This morning's announcement of a 120,000 MT soybean sale to China for 2012-13 is a reminder that exports remain strong in the face of high prices.
  • Soybean planting in Brazil has slowed to an average pace as producers wait on rains.

 

Wheat futures have firmed to post gains around 7 to 9 cents in Chicago and Kansas City while Minneapolis is seeing slightly lighter gains.

  • Traders are spreading wheat against corn ahead of USDA's reports tomorrow, betting on higher wheat prices and lower corn prices. USDA is expected to lower its 2012-13 wheat carryover projection and its world production estimate.
  • There is speculation today's government-led meeting in Russia regarding this year's crops could end with an announcement on export restrictions. Regardless of an announcement, Russia's exportable supplies are quickly diminishing.
  • Futures are also being supported by concerns about dryness in Western Australia, the FSU and the U.S. Plains.

 

Cattle futures are off to a mixed start, with live cattle favoring the upside.

  • Live cattle have seen some light profit-taking ahead of the start of cash cattle trade. Nearby futures are at a slight premium to last week's $124 cash trade.
  • Gains in the boxed beef market yesterday and slightly tighter showlist estimates has traders expecting cash trade to take place $1 to $2 above last week.
  • Yesterday, Choice boxed beef values rose 63 cents and Select was up 87 cents on impressive movement of 237 loads.
  • But lingering concerns about the well being of the global economy is limiting buying interest.
  • Feeder cattle futures are mixed as uncertainty about how the corn market will react to USDA's report tomorrow is making feeder cattle traders unwilling to add positions on either side of the market..

 

Lean hogs are slightly to moderately higher in all but far-deferred contracts, which are narrowly mixed.

  • Lean hog futures are benefiting from strength in both the pork and the cash hog market.
  • The pork cutout value rose $1.40 yesterday on improved movement of 126.5 loads. This improved packers' profit margins.
  • The cash hog index continues to rise. Early cash hog bids are mostly steady, however, as supplies are expanding seasonally. Average hog weights for Iowa/southern Minnesota rose 2.1 lbs the week ended Oct. 6 compared to the week prior.
  • Gains in the October contract are being limited by the premium it holds to the cash index, while the roughly $3 discount December futures hold to the index is supportive.
     
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