Market Snapshot, 10:00 am CT (VIP) -- October 23, 2012

October 23, 2012 05:05 AM
 

Corn futures have softened slightly to trade roughly 5 to 10 cents lower.

  • A lack of fresh fundamental news has encouraged selling amid negative outside markets. The stock market is sharply lower while the U.S. dollar index is enjoying strong gains amid disappointing earnings reports and a renewal of fiscal concerns in Spain.
  • Dollar strength makes U.S. corn prices even less attractive globally and thus heightens concerns about demand destruction.
  • USDA this morning reported non-U.S. origin export sales of 270,000 MT of corn for delivery to Mexico for 2012-13 that were previously reported as optional origin.
  • But pressure is being limited by tight supplies now that harvest is near complete.

 

Soybean futures have extended losses slightly to trade mostly 14 to 18 cents lower.

  • Soybean futures continue to face pressure amid broad risk aversion.
  • Rains are needed in areas of central and northern Brazil, while southern Brazil is too wet. This delays corn planting and ups the odds that more acres will be switched to beans.
  • This morning, Gulf basis levels were steady for all but December delivery, which was down a penny.
  • But around the country, basis levels are generally well above the norm due to tight supplies and overall demand strength. This should limit the market's downside risk.

 

Wheat futures have softened to post double-digit losses in Chicago and Kansas City while Minneapolis wheat is down 7 to 10 cents.

  • Dollar strength and broad risk aversion are weighing on the wheat market today. This is encouraging traders to book profits after strong gains yesterday.
  • Dollar strength also has the potential to limit buying interest for U.S. wheat. It is already struggling globally due to relatively high prices but is expected to benefit from tightening global wheat stocks.
  • Yesterday's crop progress report showed winter wheat planting at 81% complete, which is just above average. But just 49% of the crop is emerged, which compares to 56% on average. This raises concerns about dryness on the Plains and should limit pressure.

 

Live and feeder cattle futures are posting slight to moderate losses this morning. For live cattle, nearby contracts are the downside leader; the reverse is true for feeder cattle with deferred contracts leading losses.

  • Traders are exercising caution this morning, encouraged by broad risk aversion and uncertainty about the sustainability of current boxed beef prices.
  • Yesterday, Choice values rose $1.67 and Select firmed $1.08 on strong movement of 160 loads. While this was impressive, Choice cuts are inching toward $200.00 per cwt. -- a price that has has trimmed demand in the past.
  • Sharp losses in the Dow Jones Industrial Average and gains in the U.S. dollar index are adding to the negative tone.
  • A beef recall in Utah and Hawaii due to possible E. coli contamination is adding pressure.

 

Lean hog futures are slightly to moderately lower this morning.

  • Yesterday's Cold Storage Report showed record pork stocks at the end of September of 630.657 million pounds. This figure was around 10 million lbs. above the average pre-report guess. This signals demand has lagged supply even more than expected.
  • And with supplies still expanding seasonally, traders remain concerned a top is in or near.
  • Adding to such ideas, the pork cutout value slid 41 cents yesterday and movement of 52 loads was weaker than recent weeks.
  • Cash hog bids are steady to weaker today despite solid packer profit margins as they are having no trouble securing supplies.
     
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