Corn futures continue to enjoy gains around 3 to 7 cents in most contracts.
- Corn futures received a boost from drier weather models for Argentina. This is especially concerning as an estimated 25% of the crop is still pollinating.
- Heat and dryness in southern Brazil is also supportive, though there are chances for scattered rain in the region over the weekend.
- Spillover from soybeans on similar weather concerns is also supportive.
- Adding support, Gulf corn basis has firmed recently, including a 1- to 3-cent gain this morning for near-term delivery. This signals export demand may be improving.
- But a 2.8% decline in ethanol production to 770,000 barrels per day (the lowest since record-keeping began in mid-2010) and a 2.3% increase in ethanol stocks to 20.5 million barrels last week is limiting buying interest. This is not overly surprising in light of recent ethanol plant closures.
Soybean futures firmed with the open of pit trading to trade 20-plus cents higher through the September contract, while deferred months are enjoying gains in the teens.
- Heat and dryness in Argentina and southern Brazil with only scattered rain chances this weekend is encouraging traders to build premium into prices.
- Plus, South American export supplies are not expected to hit the market for several more weeks and that's not considering any shipping delays that have caused trouble in the past.
- This signals Chinese demand for U.S. soy may remain red-hot over the near-term. USDA today announced a daily bean sale for 175,000 MT to China for 2013-14.
- Early gains in the bean market also encouraged some technical buys as futures hit new highs for the month of January.
- Gulf based fell 5 cents for immediate delivery but firmed 2 cents for February delivery this morning.
Wheat futures have firmed slightly to trade mostly 4 to 6 cents higher at all three exchanges.
- Wheat futures are enjoying spillover support from corn and especially soybeans. A weaker U.S. dollar index is also encouraging light short-covering.
- Gains are being limited by reports Russia's ag ministry expects grain production to improve in 2013-14, thus boosting exports to 15 MMT to 20 MMT. However, 9.5% of the winter wheat crop is rated "poor," according to the country's head meteorologist. She notes this is above the five-year average of 8%.
- Recent rains in the Southern Plains is limiting gains, as is precip chances in the extended forecast. However, much more precip will be needed to improve extensive and extreme drought in winter wheat country.
Live cattle futures are off to a narrowly mixed start. Feeder cattle futures opened under pressure, but they have since improved to trade mostly slightly higher.
- Live cattle futures are seeing additional light profit-taking this morning after futures staged a strong rally Monday on news Japan will ease beef import restrictions and a reminder of tight supplies.
- Near-term upside potential is likely limited as futures are already at a $4-plus premium to the top of last week's cash prices ($122 to $124).
- Also limiting buying enthusiasm is softer boxed beef prices yesterday, though movement was again decent.
- Firmer cash cattle trade is nevertheless expected as showlist estimates are sharply lower this morning and the winter storm event in the Midwest could further tighten supplies.
- Traders are also beginning to ready positions for Friday's semiannual USDA Cattle Inventory Report. It is expected to show all cattle & calves at 98.2% of year-ago and the annual calf crop at 97.9% of last year. This is encouraging short-covering in feeder cattle.
Lean hog futures are enjoying slight gains in all but far deferred contracts this morning.
- The winter storm in the Midwest will likely disrupt hog transportation today. Still, early cash hog bids are steady to lower as packers work to pull cutting margins into the black.
- Gains in the pork cutout value this week, including a 95-cent improvement yesterday have helped to lift packer profit margins to near breakeven.
- But light pressure comes from a slight (0.2 lb.) increase in the average hog weight in southern Minnesota and Iowa for the week ended Jan. 26.
- A weaker U.S. dollar index is also encouraging of light short-covering today, as is the $1-plus discount the February lean hog contract holds to the cash hog index.