Market Snapshot, 10:00 CT (VIP) -- October 11, 2012

October 11, 2012 05:04 AM
 

 

Corn futures have firmed to post gains in the upper 20s to low 30s (mostly) through the July contract.

  • Traders are giving USDA's Crop Production and Supply & Demand Reports a friendly read this morning, focusing on the fact that USDA trimmed 2012-13 carryover more than expected to 619 million bushels.
  • USDA pegs corn production at 10.706 billion bu., which came in above expectations, but still down from September.
  • The global 2012-13 carryover projection is also down substantially (14.27 MMT) from year-ago at 117.27 MMT.
  • A weaker U.S. dollar index is also encouraging buying in the commodity sector.

 

Soybean futures have strengthened to post gains in the 20s to 30s with nearbys leading to the upside.

  • While USDA's crop estimate of 2.86 billion bu. topped expectations and last month's tally, traders are focused on the overall tightness of supplies.
  • Carryover of 130 million bu. was in line with expectations and reminds the market that rationing is needed as export demand remains strong.
  • Traders are paying little attention to reports soybean production in Argentina is expected to reach 55 MMT to 60 MMT in 2012-13, according to the country's Ag Ministry sub-secretary, which would smash the old record of 52.7 MMT in 2009-10. Much of the growing season remains and these supplies will not hit the market until 2013.
  • Positive outside markets are also supportive of commodity buying.

 

Wheat futures have firmed to post gains in the upper teens to 20s at all three locations.

  • USDA's domestic and global carryover data is supportive of wheat futures. USDA trimmed 2012-13 wheat carryover for the U.S. to 654 million bu. -- down 89 million bu. from the last marketing year.
  • Plus USDA lowered its global 2012-13 wheat carryover projection to 172 MMT, which is down 4.71 MMT from last month and down 26.17 MMT from last year. This is a reflection of global production concerns that have supported wheat the past few months.
  • Wheat is also enjoying strong spillover support from corn and soybeans.
  • Ukraine's ag ministry announced that it raised its wheat export cap by 1 MMT from the previous agreement to 5 MMT for 2012-13. Nevertheless, exports from the Black Sea region are expected to slow in the near future as supplies are tightening.

 

Live cattle futures are enjoying slight to moderate gains, while feeder cattle futures are moderately lower.

  • Expectations for higher cash cattle trade this week are encouraging light short-covering in cattle futures today. Yesterday packers raised bids, but trade has yet to begin.
  • An impressive performance in the boxed beef market this week and tighter showlist estimates give feedlots the upper hand in negotiations. Yesterday, boxed beef prices softened slightly but this encouraged a surge in movement to 342 loads.
  • Feeder cattle futures are being pressured by strength in corn.
  • USDA lowered its 2012 and 2013 beef production projections from last month to reflect a tightening supply situation. USDA made little change to its price forecasts and it left its export projections unchanged.

 

Lean hog futures are split with nearbys slightly to moderately lower and deferred months posting similar gains amid spreading.

  • Traders are booking some light profits in nearby contracts after today's USDA reports reminded producers they will face high feed costs going forward.
  • Also, the front-month October contract that expires tomorrow is still at a slight premium to the cash hog index.
  • But downside risk is limited as the pork cutout market continues to improve, pointing to strong export demand. USDA left its 2012 pork export projection unchanged, but it did raise its projection for 2013.
  • USDA raised its 2012 and 2013 pork production projections from last month.
  • Supplies are expanding seasonally, but profitable margins are encouraging packers to keep bids steady this morning.
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