Market Snapshot, 10:00 am CT (VIP) -- October 17, 2012

October 17, 2012 05:03 AM
 

Corn futures have pared gains slightly to trade around a penny higher through the September contract and mixed in far-deferred months.

  • Traders continue to weigh concerns about tight supplies against those about demand destruction, with a weaker U.S. dollar index giving bulls a slight edge.
  • Gulf basis is up a penny for immediate delivery and steady for other months, showing supplies are not readily available.
  • But it is also obvious that export demand for corn has slowed significantly. Daily corn sales announcements have been few and far between and weekly export sales have generally been disappointing. End-users -- even some within the U.S. -- are actively seeking cheaper alternatives to U.S. corn.

 

Soybean futures have backed off earlier highs and are trading 2 to 5 cents higher.

  • Sharp weakness in the U.S. dollar index due to some positive signs in the euro-zone and a surge in U.S. housing starts are encouraging short-covering in soybeans today.
  • Plus, signs of improvement with the Chinese economy are supporting ideas the country will remain a major buyer of U.S. soybeans.
  • Also, recent export activity shows that needed supply rationing has yet to occur.
  • Strong basis levels are also supportive. Farmers marketed more of their corn straight off the field due to aflatoxin concerns. This freed storage space for soybeans, further limiting the amount of soybeans available.

 

Chicago and Kansas City wheat are mostly 1 cent higher, while Minneapolis wheat is seeing slightly greater gains thanks to strong demand for high-protein wheat.

  • Modest gains in the corn market along with dollar weakness has encouraged some short-covering in the wheat market today.
  • But as U.S. wheat has been passed over time and time again in recent weeks because it is not competitively priced, traders are hesitant to add risk.
  • But this situation is expected to change in the months ahead as supplies in the Black Sea region dwindle.
  • Also, soil moisture profiles in the U.S. Plains are expected to improve thanks to recent and forecast rains. Recent rains in areas of the FSU and Europe have also improved winter wheat crop prospects.

 

Live cattle futures are off to a slightly higher start this morning. Feeder cattle futures are enjoying moderate gains.

  • Cattle futures are enjoying light followthrough buying this morning amid ongoing strength in the boxed beef market.
  • Yesterday, Choice and Select cuts rose $1.14 and $1.66, respectively. Movement also picked up from the day prior to 173 loads.
  • This along with a slightly smaller showlist this week points to firmer cash cattle trade. Last week, cash trade took place at $125 to $126 in Texas and mostly $125 elsewhere.
  • October live cattle are trading in line with these cash prices, opening upside potential.
  • Sharp weakness in the U.S. dollar index amid an easing of euro-zone concerns and positive U.S. housing starts data are also encouraging commodity buying.
  • Feeder cattle futures are benefiting from corrective short-covering amid ideas the downside was overdone yesterday.

 

Lean hog futures are off to a choppy start this morning.

  • A steady cash hog market is not enough to encourage traders to actively add long positions as they remain concerned that the pork market may be working on a top. Supplies continue to expand and the seasonal trend is for a pullback in prices.
  • Hog weights in Iowa and Southern Minnesota for the week ended Oct. 15 are up 1 lb. from the week prior.
  • But selling interest is also limited as packers are still enjoying profitable margins and therefore are planning a large kill this weekend.
  • Plus, the pork market has yet to show that demand lags production. Yesterday the pork cutout value slid just 7 cents and movement was impressive at 103.
  • Support for December lean hogs also comes from the $4-plus discount they hold to the CME cash hog index.
     
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