Market Snapshot, 10:00 a.m. (VIP) --Advice -- March 7, 2014

March 7, 2014 03:58 AM

Corn and soybean producers: Reward the rally with sales… May corn futures have rallied nearly 90 cents from their winter low, while December futures have rallied nearly 60 cents. The trend is definitely higher, but that's too much of a rally to pass up, especially since basis is weakening. Corn producers are advised to make a 10% 2013-crop cash sale. This pushes hedgers to 70% sold on old-crop and cash-only marketers to 60% sold. Corn producers are also advised to sell another 10% of expected 2014-crop production via cash forward contract sale for harvest delivery. This pushes both hedgers and cash-only marketers to 30% forward priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Soybean hedgers and cash-only marketers are also advised to increase new-crop sales to take advantage of the $1-plus rally in November soybean futures. Make a 15% cash forward contract sale for harvest delivery to get to 25% priced on expected 2014-crop production. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Wheat producers: Increase old- and new-crop sales… Wheat futures have rallied stronger and the rally has lasted longer than we anticipated. With futures around $1 off the winter lows, it's time to reward the rally. Cash-only marketers are advised to make a 15% 2013-crop sale to get to 90% sold on old-crop. Hedgers and cash-only marketers are advised to sell 15% of expected 2014-crop production via cash forward contract for harvest delivery to get to 50% priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Corn futures are 1 to 5 cents lower this morning.

  • Corn futures have seen some bull spreading activity to wrap up the week, along with profit-taking.
  • While demand for old-crop corn remains strong, expectations for a large 2014-15 crop are weighing on deferred months.
  • Adding to favorable production prospects this year is a 50% chance for El Nino this summer.
  • Gulf corn basis is 1 cent firmer for immediate delivery this morning, which is also a positive demand signal.
  • But gains in the futures markets have spurred farmer sales. This has caused basis at interior locations to soften.
  • The move above $5.00 in the May contract overnight has spurred some technical-based profit-taking. Mild strength in the U.S. dollar index is also encouraging this.
  • Traders are also reducing risk exposure ahead of Monday's USDA Supply & Demand Report, which is expected to show old-crop corn carryover up slightly from last month at 1.487 million bushels.


Soybean futures have traded in a wide range this morning and are currently split with old-crop 4 to 12 cents higher and new-crop 1 to 5 cents lower.

  • Soybean futures have also seen some bull spreading this morning as the market expects increased bean acres in 2014, but strong export demand for old-crop beans remains fresh in traders' minds.
  • Nearby contracts have hit new contract highs this morning.
  • Traders expect Monday's USDA Supply & Demand Report to show a drawdown of old-crop soybean stocks due to continued strong export demand. The market expects USDA to lower its old-crop carryover estimate 9 million bu. from February to 141 million bushels.
  • While China has reported small sales cancellations, shipping delays in Brazil have kept the nation buying U.S. beans longer than anticipated.


Wheat futures are 4 to 10 cents higher in most contracts across all three flavors.

  • The ongoing dispute between Ukraine and Russia has traders expecting demand for U.S. wheat to improve. While the region is open for business, export sources say recent bookings of wheat from the Black Sea region have declined.
  • Uncertainty regarding the path forward for the Black Sea region has many covering short positions ahead of the weekend.
  • Traders are also reducing risk exposure ahead of Monday's S&D Report. Pre-report expectations are for USDA to raise its 2013-14 wheat carryover peg from 558 million bu. in February to 567.75 million bushels.


Live cattle futures are mixed with an upside bias.

  • Most live cattle contracts have seen some mild buying interest this morning. While cash cattle trade took place at lower prices of $148 on the Southern Plains and $150 in Nebraska, this is still above nearby futures prices.
  • Lower trade was a bit disappointing considering impressive gains in the beef market this week as well as tighter showlist estimates.
  • Yesterday Choice and Select boxed beef cuts rose $1.07, but movement slowed to 101 loads. Lower movement at higher prices has traders on watch for a pullback in the product market.
  • Futures have also given some signals a top may be in the works this week. Of note, the April contract posted a key bearish reversal Wednesday.
  • Spillover support is lifting feeder cattle futures. In addition, a slight pullback in corn prices at times today is seen as positive.


April lean hog futures gapped higher on the open. Most contracts are enjoying moderate gains.

  • Tight supplies are lifting cash hog prices again today. Summer months are benefiting from expectations the porcine epidemic diarrhea virus (PEDV) will further tighten supplies down the road.
  • The National Animal Health Laboratory Network reports a total of 252 new cases of PEDV were confirmed in the last reporting period, bringing the grain total to 4,106. While down from the previous week's high, the tally continues to grow.
  • Also supportive, the pork cutout value improved $1.75 yesterday, but movement slowed to 257.8 loads to signal high prices are slowing demand.
  • Gains in the product market have kept packers cutting in the black, lifting their demand for market-ready hogs.
  • While the posture of the market continues to favor market bulls, the Relative Strength Index signals a time or price correction is due.
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