Market Snapshot, 10:00 am CT (VIP) -- September 5, 2012

September 5, 2012 05:09 AM
 

Corn futures softened with the open of pit trading to post losses of 6 to 10 cents in the September through July contracts, with far-deferred months seeing lighter losses.

  • USDA yesterday reported that harvest is 10% complete, which signals supplies are beginning to hit the market. The current price structure and quality of the crop gives producers little incentive to store grain.
  • This has resulted in softer basis levels at interior and Gulf locations.
  • Rains moving across the Corn Belt overnight and this morning could keep combines out of the field and possibly cause further yield damage, however.
  • Outside markets are providing little direction as investors are waiting to see if the European Central Bank will embark on a bond buying program.

 

Soybean futures have softened to post losses in the teens in most contracts.

  • Soybean futures are facing profit-taking after their rise to all-time highs yesterday.
  • Yesterday's condition ratings showed very slight improvement in the condition of the crop, which gives traders little reason to be buyers this morning.
  • With 19% of the soybean crop dropping leaves, traders expect harvest to get underway for beans soon, which translates to harvest-related hedge pressure. This has also resulted in softer cash markets in anticipation of fresh supplies coming to market.
  • But tight supplies and recognition that lofty prices have yet to slow use.

 

Wheat futures have softened to post double-digit losses in many contracts at all three locations.

  • Weakness in the corn market has encouraged profit-taking in the wheat market as it lacks fresh bullish news with which to fend off spillover pressure.
  • Recent demand activity has shown U.S. wheat is not competitively priced on the global export market.
  • Plus, rains in the Central and Southern Plains improves winter wheat planting prospects.

 

Live and feeder cattle futures are enjoying slight gains in most contracts.

  • A strong start to the boxed beef market yesterday signals retailers plan to feature beef in the weeks ahead.
  • A Japanese government advisory panel on food safety agreed on recommendations about easing U.S. beef imports. This gives the market hope restrictions will eventually be eased.
  • But traders are hesitant to aggressively add long positions as the seasonal trend following Labor Day is for boxed beef and cash markets to soften and futures are already well above last week's $122 to $123 cash cattle prices.
  • Feeder cattle are enjoying short-covering thanks to softer corn prices and ideas harvest pressure will lead to additional declines in feed costs.

 

Lean hog futures are mixed with nearby contracts moderately higher and deferred months slightly to moderately lower amid bull spreading.

  • Traders are engaging in some short-covering today after yesterday's strong pork movement on softer prices gave traders hope high beef prices will shift some demand to this cheaper cut of meat.
  • The market is also enjoying some technical buying interest as traders work to narrow the discount futures hold to the cash hog index.
  • But supplies continue to expand and packers are thought to be well supplied for the week. This is keeping the cash hog market under pressure and will limit futures' upside potential.
  • The downside for deferred months is being limited by the fact that aggressive sow liquidation now will tighten supplies down the road.
     
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