Market Snapshot, 10:00 CT (VIP) -- January 3, 2013

January 3, 2013 04:01 AM
 

Corn futures improved with the open of pit trading. Nearby futures have seen choppy trade, but are currently posting slight losses. Deferred contracts are around 5 cents lower.

  • Funds dumped long corn futures heading into year-end and this continued at the start of 2013. The market will need fresh export demand news to encourage them to come back to the market as buyers.
  • Export demand has long been lacking. This morning's mostly steady Gulf basis levels signal this will remain the case over the near-term.
  • Investors are also watching the 200-day moving average which has acted as support since June. The contract has tested but thus far respected this level, which intersects at $6.83 1/2 today. Respect of this level has encouraged light short-covering in nearby contracts.
  • Dollar strength and losses in the stock market are also making it difficult for corn to rally.

 

Soybean futures pared losses with the open of pit trading. Most contracts are 4 to 10 cents lower.

  • Dollar strength is encouraging followthrough technical selling in the bean market after futures posted a bearish reversal yesterday.
  • Pressure also stems from news China canceled 315,000 MT of U.S. soybean orders for 2012-13, reminding the market the country may soon begin sourcing its needs from Brazil.
  • Harvest is getting started for some early-planted beans in Brazil, which means the U.S. will soon face competition on the global export market.
  • Gulf basis levels slipped a penny for immediate delivery today, also pointing to slower export demand.
  • But recognition that the export pace is nevertheless well ahead of year-ago levels is making the market hesitant to push prices too low, especially considering South America is no stranger to shipping troubles.

 

Wheat futures have improved to post slight gains in nearby Chicago and Kansas City wheat futures, though far deferred months remain under pressure. Minneapolis wheat is 1 to 8 cent higher.

  • Wheat futures have firmed thanks to short-covering amid ideas the downside was overdone yesterday, especially considering worrisome drought across the country's midsection.
  • But losses in the corn and bean markets and dollar strength mean that is the extent of buying interest.
  • Export news signaling U.S. wheat is competitively priced is needed to spark a rally in wheat. Tightening global wheat supplies have had investors expecting a demand uptick for U.S. wheat for months, but this has in actuality been slow to occur.

 

Live cattle futures are enjoying moderate gains this morning. Feeder cattle futures opened under pressure, but they have since firmed to trade moderately higher.

  • Live cattle futures are enjoying short-covering today as traders wait for cash cattle trade to begin. A few light sales took place in Iowa yesterday at $124 to $127, steady to lower compared to the week prior.
  • Most expect steady to firmer cash prices compared to week ago, but upside potential in futures is limited as nearby contracts are nearly $6 above those cash prices.
  • The boxed beef market softened yesterday, with Choice cuts down 21 cents and the Select up $1.57. Movement also slowed from recent weeks to 148 loads.
  • A sharply higher U.S. dollar index today is also limiting gains.
  • Ideas the downside was overdone yesterday and weakness in the corn market are supporting feeder cattle futures.

 

Lean hog futures are slightly to moderately higher in early trade.

  • Traders are engaging in some light followthrough buying thanks to recent strength in the cash hog market as packers worked to secure needs after holiday downtime.
  • Early cash hog bids today are again steady to $1 higher.
  • But the cash market may soon soften, as a $1 decline in the pork cutout value yesterday pulled packer profit margins deeper into the red.
  • Also limiting buying interest is the $4-plus premium February futures hold to the cash hog index and a sharply higher U.S. dollar index.
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