Market Snapshot, 10:00 am CT (VIP) -- October 18, 2012

October 18, 2012 05:04 AM
 

Corn futures improved with the open of pit trading to post gains of mostly 6 to 10 cents, with nearbys leading the way.

  • Corn futures are enjoying strong spillover support from soybean futures.
  • Also, this morning's weekly export sales tally of 166,700 MT met expectations, though expectations were low. Japan was the lead buyer, which is notable because it adds to ideas the country is in need of corn.
  • Tight supplies have kept Gulf corn basis steady to firmer this week.
  • Adding to supply concerns, Strategie Grains cut its 2012-13 corn crop forecast for the European Union by 900,000 MT to 52.8 MMT.
  • Also today, Taiwan Sugar Crop tendered for 23,000 MT of U.S. corn.
  • Support also comes from CPC's Seasonal Drought Outlook, which calls for drought to persist across much of the Corn Belt through January.

 

Soybean futures rallied with the start of the open outcry session. Nearby contracts are now 20- to 30-plus cents higher. Far deferred months are seeing gains in the teens.

  • While this morning's weekly soybean export sales of 523,400 MT for 2012-13 and 1,800 MT for 2013-14 fell short of expectations, the overall soybean export pace remains much more aggressive than needed to reach USDA's export projection.
  • News Taiwan Sugar Corp. tendered for 12,000 MT of U.S. soybeans is adding support.
  • Therefore, the market is still working to find a price to ration use.
  • Expectations for drought to persist into January for much of the Midwest and the Plains is also supportive, as the market needs a strong production recovery to prevent another tight supply situation next year.

 

Chicago and Kansas City wheat are up 8 to 13 cents, while Minneapolis wheat is seeing slightly lighter gains.

  • Wheat futures are benefiting from followthrough buying and spillover support from corn and soybeans today. Traders view the downside as having been overdone on Monday.
  • Weekly wheat export sales of 410,000 MT topped expectations and gave traders hope that the U.S. is finally benefiting from tightening global stocks.
  • But gains are being limited by a generally favorable start for the winter wheat crop in the Central and Southern Plains. These regions have recently seen some drought improvement.
  • But more improvement is needed and the CPC's extended weather outlook calls for drought to persist in winter wheat country.

 

Live cattle futures are enjoying slight to moderate gains this morning.

  • With cash cattle bid and asking prices far apart, cash trade is not expected to get underway until Friday -- possibly after the Cattle on Feed Report.
  • Expectations are high that cash trade will take place at firmer prices this week as showlists are down and the boxed beef prices and movement have been strong this week.
  • Plus, supplies are expected to tighten over the long-term. The Cattle on Feed Report is expected to show all categories below year-ago with Placements at just 85% of last year.
  • Weekly beef export sales were again solid at 14,500 MT for 2012 and 400 MT for 2013.
  • Buying interest is being limited, however, by gains in the U.S. dollar index. U.S. jobless claims jumped this week and China's economic growth continues to slow.

 

Lean hog futures are off to another narrowly mixed start.

  • Early cash hog bids are mostly steady, but some weaker bids may be seen later as packers are having no trouble securing market-ready hogs.
  • Packers are enjoying wide profit margins as the pork cutout market is still up compared with last week and the cash hog market has trended steady to lower. Packers will continue an aggressive slaughter pace until it becomes unprofitable to do so. Thus, traders will keep a close eye on the pork market.
  • Yesterday, the pork cutout value fell 7 cents, but this encouraged strong movement.
  • Light pressure also comes from news China's pork production is up 5.2% from last year.
  • Traders are also hesitant to add risk ahead of the Cold Storage Report Monday, which is expected to show frozen pork stocks at the end of September of 620.3 million lbs., which would be an all-time high for the month and a 26% increase from last year.
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