At a Jackson Hole, Wyo., speech this morning, Federal Reserve Chairman Ben Bernanke acknowledged the economic recovery was too slow and the central bank would act as needed to address the situation. But he did not indicate additional easing would come "soon." Markets were initially disappointed the speech did not result in another round of quantitative easing and reacted by pulling the stock market well off its early highs and pushing the U.S. dollar index lower, but both of these are now back to earlier levels as Bernanke left QE3 on the table.
Corn futures have softened to trade fractionally to 9 cents lower, with nearbys leading to the downside.
- Traders are hesitant to add positions ahead of the extended weekend as they are uncertain whether to focus on the demand or supply side of the balance sheet.
- Yesterday's export sales report reminded the market that high prices have taken a big bite out of global demand for corn.
- But traders are also worried that the small crop could get smaller if heavy rains and wind in the southern and eastern Corn Belt cause trouble for a crop with standability issues.
- Traders are also working to ready their books for the end of the month.
Soybean futures are 9 to 12 cents lower amid light profit-taking after yesterday's contract highs.
- Soybean traders are taking advantage of yesterday's contract highs by booking profits ahead of the long weekend.
- Also, rains for areas of the Midwest and Mid-South could still benefit some late developing beans.
- Gulf basis levels are 2 to 10 cents lower this morning as a result of export disruptions due to Hurricane Isaac.
- However, downside risk remains limited by signs high prices have yet to achieve the rationing needed to stretch the small crop.
Wheat futures have extended early losses to the teens at all three exchanges.
- Russian officials say there's no need to restrict grain exports, but its ag ministry cuts its grain crop forecast to 70 million metric tons (MMT) to 75 MMT after lowering it to 75 MMT last week.
- Minneapolis wheat is following Chicago and Kansas City lower, but losses aren't quite as steep due to quality concerns overseas.
Live cattle futures are mixed with nearbys favoring the upside. Feeder cattle futures are moderately higher thanks to softer corn prices.
- Traders are favoring the upside this morning after cash cattle trade began at $120 to $121 late Thursday in Nebraska -- steady with last week. But the standoff between packers and feedlots continues in the Southern Plains.
- When trade does get underway in Kansas and Texas, packer demand is expected to be limited due to the holiday-shortened week and the tendency for beef demand to moderate following Labor Day.
- Yesterday, Choice and Select cuts slipped 9 and 92 cents, respectively, while movement was decent at 157 loads. Softer prices with decent movement align with the recent trend.
Lean hog futures are posting moderate to sharp losses this morning.
- Market action to close out the week and the month signals traders expect weakness in the lean hog market to continue.
- Hog production is expanding seasonally, plus high feed costs have increased sow liquidation. This week's total hog production is expected to be up 6.5% from last year.
- Therefore, cash hog bids are lower again this morning despite strong packer profit margins.
- Plentiful hog supplies have also weighed on the pork market. Yesterday, the pork cutout value slid 99 cents, though movement was decent at 71.50 loads.
- A sharply lower U.S. dollar index and the discount nearby futures hold to the cash hog index are helping prevent losses from escalating in lean hog futures.