Market Snapshot, 10:00 CT (VIP) -- November 2, 2012

November 2, 2012 04:54 AM
 

 

The U.S. dollar index is sharply higher in reaction to this morning's monthly employment report, which showed non-farm payrolls of 171,000 were added in October, which was more than expected. Revisions to August and September data showed more jobs created those months, but the unemployment rate still upticked from 7.8% to 7.9%.

Corn futures softened with the open of pit trading. December through September futures are now double-digit lower; deferred months are mixed.

  • Dollar strength and spillover pressure from soybeans are encouraging profit-taking ahead of the weekend. Technical selling picked up as nearby contracts moved through support at the 100-day moving average.
  • Also, while this morning's weekly corn export sales tally 167,600 MT for 2012-13 met expectations, it still reflects lackluster demand.
  • News FC Stone raised its corn production estimate by 57 million bu. to 10.881 billion bu. from last month is adding pressure. This raises concerns USDA may make similar adjustments in its Crop Production Report next week.
  • Selling is being limited by ideas recent surges in South American corn prices, which bulls hope will improve demand for U.S. supplies.

 

Soybean futures have extended losses into the teens to 20s through the July contract. Deferred months are choppy.

  • Dollar strength and profit-taking to wrap up a week of gains is pressuring soybeans.
  • Also, rain chances for northern Brazil would improve planting prospects there, which is adding to the negative tone.
  • Plus, news FC Stone raised its soybean crop estimate by 110 million bu. from October to 2.959 billion bu. has traders concerned USDA will take similar action next week.
  • Traders are ignoring this morning's weekly export sales data that showed stronger-than-expected sales of 741,200 MT for 2012-13 and sales of 19,400 MT for 2013-14. This may signal traders view strong demand as factored into prices.

 

Wheat futures have softened to post losses around 8 to 9 cents in Chicago, around 7 to 8 cents in Kansas City and roughly 3 to 4 cents in Minneapolis.

  • Wheat futures softened along with corn as the two are tied by their use in feed.
  • The market was again reminded that U.S. wheat is not competitively priced. While weekly wheat export sales of 362,900 MT for 2012-13 matched expectations, the tally was still down from week ago and generally unimpressive.
  • U.S. wheat is expected to benefit from tightening supplies in the Black Sea region and Australia, but this is taking longer to materialize than bulls had hoped.

 

Live cattle futures are posting slight losses while feeder cattle futures are slightly higher in most contracts.

  • Traders are engaging in light profit-taking ahead of the weekend as they feel near-term fundamentals have weakened.
  • The boxed beef market has posted heavy declines for the week, though this has encouraged strong movement.
  • Plus, with much of the East Coast without power, the market is concerned about the reduced meat demand implications of this.
  • Sharp gains in the U.S. dollar index are adding to the negative tone.
  • Cash cattle trade is thought to be complete at mostly $126 to $127. December futures are at a discount to this prices, limiting selling pressure.
  • Weekly beef export sales of 14,600 MT for 2012 and 600 MT for 2013 were down slightly from last week's tally, but this still represents solid demand.
  • Nearby feeder cattle futures are benefiting from corrective short-covering and weakness in the corn market.

 

Lean hog futures are mixed with nearby contracts favoring the upside and deferred months mostly lower.

  • December lean hogs are benefiting from the $5-plus discount they hold to the cash hog index.
  • Futures are also benefiting from ideas the market's bearish reversal yesterday overdid the downside as pork movement has impressed this week.
  • But traders are still exercising caution toward the long side of the market as they recognize supplies are building seasonally and that Superstorm Sandy could reduce meat demand for some time. Also, pork demand could slow ahead of Thanksgiving.
  • Cash hog bids are thus steady to slightly lower today.
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