Market Snapshot, 10:00 CT -- Advice (VIP) -- December 6, 2013

December 6, 2013 04:09 AM
 

HOG PRODUCERS: CLAIM PROFITS ON 4th-QTR. HOG HEDGES… Hog producers should claim profits on the hedges covering 100% of 4th-qtr. production in December lean hog futures. After a week of very heavy price pressure, December futures are now at a discount to the cash index, which is starting to firm. With just one week until the contract expires, it's time to exit the 4th-qtr. hedge coverage. While we may end up leaving some money on the table, we're not willing to risk the accumulated profits.

We're willing to maintain the hedges covering 50% of expected 1st-qtr. production in February lean hog futures for now. But be prepared to exit this coverage when the market signals a seasonal low is in place.
 

Corn futures are mostly 1 to 2 cents lower this morning.

  • Buying interest is limited ahead of weekend. But futures are working on mild gains for the week.
  • Traders also remain uneasy about recent rejections of U.S. corn shipments by China. Syngenta has reportedly applied for approval again of its Agrisure Viptera product that has been denied "many times" dating back to 2010.
  • Gulf basis is steady to a penny higher for near-term delivery, signaling rebuilding export demand. Light support stems from news Taiwan bought 60,000 MT of U.S. corn overnight.

 

Soybean futures have softened to post losses of 5 to 8 cents through the August contract, with far-deferred contracts seeing lighter losses.

  • Traders are lightening their long exposure to the soybean market ahead of the weekend.
  • The market continues to trade within a narrowing consolidation range as traders weigh expectations for a large South American crop against strong demand for U.S. soybeans.
  • USDA announced 384,150 MT in daily soybean sales to unknown destinations this morning, with the total near evenly split between 2013-14 and 2014-15 delivery.
  • But countering this is a 10-cent slide in Gulf basis for February delivery. Basis held steady for other delivery months.
  • A Reuters report says an Argentine government official says the country is not planning to cut its soy export tax, as was rumored yesterday. But traders are still uneasy over the situation as a cutting of the Argentine export tax would be price-negative for soybean futures.

 

Wheat futures are narrowly mixed across all three flavors this morning.

  • Spillover pressure from corn and soybeans is encouraging some followthrough selling in the wheat market today. Strength in the U.S. dollar index on better-than-expected employment data is also encouraging of this.
  • But some traders are also covering short positions amid weather concerns in the U.S.
  • Frigid temps across winter wheat country and wintry precip for the Mid-South could take a toll on the winter wheat crop. While some northern areas have protective snowcover, this is not the case in some states like Nebraska, Colorado or southern states.
  • News Russian wheat prices rose for the ninth consecutive week on concerns about unfavorable weather there diminish concerns about export competition from the Black Sea region.

 

Live cattle futures are under light pressure. Feeder cattle futures are also posting slight losses in most contracts.

  • Live cattle futures are seeing light followthrough sales in most contracts today after most contracts posted heavy losses yesterday.
  • December futures are at a slight discount to yesterday's $132 cash cattle while the February contract is at a slight premium to yesterday's cash prices.
  • These cash prices were steady with those the week prior thanks to tight supplies.
  • Choice boxed beef values fell 89 cents and Select fell 42 cents yesterday, while movement was on the light side at 152 loads.
  • Feeder cattle futures are also seeing followthrough selling today, though weakness in corn is limiting pressure on feeders.

 

Lean hog futures are lower amid followthrough selling this morning.

  • Lean hog futures sustained significant technical damage this week, which is causing more chart-based selling.
  • Packers are generally well supplied on near-term needs. Therefore, cash hog bids are steady to $1 lower this morning, despite strong packer profit margins.
  • The December lean hog contract is now trading at around a $1 discount to the cash index, which should help to limit pressure.
  • The pork cutout value firmed 16 cents yesterday and movement was solid at 389.59 loads, which is also helping to limit selling interest.
     
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