Market Snapshot, 10:00 am CT (VIP) --Advice -- November 1, 2012

November 1, 2012 05:06 AM
 

ADVICE: LIVESTOCK PRODUCERS: COVER A PORTION OF 4TH, 1ST QTR. SOYBEAN MEAL NEEDS...

Soybean meal futures are actively strengthening again amid strong demand and supply concerns. As a result, there's more near-term upside price risk. Livestock producers are advised to cover 50% of remaining 4th-qtr. protein needs in long December soybean meal futures and to cover 25% of expected 1st-qtr. needs in long March meal futures.

Be prepared to be flexible with this coverage. If South American weather turns favorable and puts pressure on the market, we'll lift the hedge coverage.

Corn futures continue to see gains around 2 cents through the July contract, with farther deferred months seeing slightly stronger gains.

  • Corn futures are enjoying light followthrough buying today thanks to support from beans.
  • Light support also comes from a rise in South American prices recently, which could improve demand for U.S. corn. Many, including livestock producers in the Southeast U.S., have recently turned to the region to supply near-term needs.
  • But buying interest will be limited until the market receives some demand news. Steady to lower Gulf basis levels this morning confirm lackluster export demand.

 

Soybean futures continue to enjoy gains ranging from 13 to 16 cents in most contracts.

  • Talk China has been buying U.S. soybeans this week is encouraging followthrough buying.
  • While this talk has not been confirmed, morning Gulf basis levels firmed both yesterday and today for November delivery.
  • While there are prospects for record-large South American bean production, current planting delays are seen as supportive for soybean futures as this means an early start to Brazilian bean exports is unlikely.
  • Also this morning's manufacturing data from China signaled modest economic improvement and expansion in the sector.

 

Wheat futures have softened to choppy trade at all three exchanges.

  • Early gains in the wheat market has given way to light profit-taking.
  • But pressure is being limited by yesterday's crop condition and progress report from USDA. The first winter wheat crop condition rating of the season showed the crop in worse shape than year-ago. And while planting is now ahead of the five-year average pace at 88% complete, emergence lags the average by four percentage points at 63%.
  • The trouble with the winter wheat crop can largely be attributed to dryness in the Plains. This morning's National Drought Monitor shows little change in the drought situation across the Central and Southern Plains.
  • Also supportive is news SovEcon cut its 2012 Russian wheat crop estimate from 38 MMT to 37.5 MMT. This adds to the tightening global stocks outlook, which is eventually expected to result in improved export demand for U.S. wheat.

 

Live cattle futures are off to a choppy start with nearby contracts favoring the upside. Feeder cattle futures are under light pressure.

  • Live cattle futures faced light profit-taking on the open after sharp declines in the boxed beef market yesterday. Choice values plunged $3.40 and Select cuts declined $1.23, though this did encourage impressive movement of 228 loads.
  • But nearby futures quickly firmed as traders try to keep December live cattle in line with this week's $126 and $127 cash cattle trade. Cash cattle trade is thought to be complete in the Southern Plains, though more sales could take place in Nebraska.
  • Expectations that supplies will continue to tighten through year-end and into 2013 limits downside risk for the market.
  • Feeder cattle futures are again facing light pressure due to slight gains in corn futures.

 

Lean hog futures are steady to higher this morning.

  • Lean hog futures are benefiting from followthrough buying after yesterday's gains in the pork cutout market -- in terms of price and movement -- lifted packer profit margins and demand.
  • Eastern Corn Belt plants are still working to secure needs for a large Saturday kill after they were closed earlier this week due to Superstorm Sandy.
  • But seasonally expanding supplies are keeping cash hog bids mostly steady, though some lower bids may be seen.
  • The cash hog index declined again to $83.98, but it is still at a significant premium to December futures. This is also supporting the contract.
     
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