Market Snapshot, 10:00 am CT (VIP) -- October 8, 2012

October 8, 2012 05:06 AM
 

Corn futures trimmed losses with the open of pit trading to trade around a penny lower in the December through July 2013 contracts, while far-deferred months are mixed.

  • Lacking fresh fundamental news, traders are focusing on negative outside markets and broad risk aversion thanks to news the World Bank lowered both its 2012 and 2013 GDP forecast for China.
  • But spillover from the wheat market has helped corn pull well off its lows.
  • Traders are also readying for Thursday's Crop Production Report. Traders anticipate a smaller corn crop and ending stocks estimate from USDA than last month, but they are unwilling to add risk in case of a "surprise."

 

Soybean futures moved off their lows with the open of the outcry session and are currently 1 to 11 cents lower.

  • Strength in the U.S. dollar index and general risk aversion is making it difficult for soybeans to find buyers to start the week.
  • Plus, traders have USDA's Crop Production Report on their minds. Traders expect USDA to raise its production estimate Thursday.
  • Gulf basis levels softened for all delivery months this morning. This signals more supplies are coming available as harvest progresses.
  • Traders expect tomorrow's Crop Progress Report to show harvest more than half done.
  • Weekend rains in South America are another source of pressure as this is beneficial for what is expected to be a large (potentially record) South American crop.

 

Wheat futures have strengthened to post gains of 7 to 9 cents in most contracts at all three locations.

  • Nearby wheat futures are drawing support from concerns about dry weather in Australia, Russia and Ukraine.
  • Russia's deputy minister expects total grain production of 70 MMT, which is below the 72 MMT to 74 MMT forecast by the country's ag ministry.
  • France's ag ministry lowered its wheat crop forecast to 35.9 MMT, but that's still up 5.6% from last season.
  • Also today, Offre & Demande Agricole UK says it expects the country's winter wheat production to fall 1 MMT from last month to 13.6 MMT. This will make the country a net importer of wheat in 2012-13 according to the firm.

 

Live cattle futures opened under pressure, but they have since improved to post slight gains. Feeder cattle futures also slightly firmer in early trade.

  • Dollar strength encouraged traders to engage in some light selling on the open, but this quickly gave way to short-covering as October futures are below last week's cash trade.
  • Cash cattle trade took place at firmer prices last week and slaughter for the week was smaller than expected, fueling ideas supplies are tightening.
  • But the boxed beef market softened late last week. On Friday, Choice cuts dropped $1.36 and Select values fell $1.45. Movement also slowed to 151 loads.
  • Considering negative packer margins, the boxed beef market must improve this week to get them to raise bids again.
  • Feeder cattle futures are benefiting from weakness in the corn market.

 

Lean hog futures are enjoying slight gains in all but some far deferred contracts.

  • Early cash hog bids are mostly steady. Packers are enjoying profitable margins but seasonally expanding supplies give them little urgency to raise bids.
  • On Friday, the pork cutout value slid 68 cents, but movement was solid at 63.5 loads. This is limiting buying interest.
  • Gains are also being kept in check by signs China's economy is slowing. This raises concerns about global meat demand.
     
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