Market Snapshot, 10:00 CT (VIP) -- October 19, 2012

October 19, 2012 05:02 AM
 

 

Corn futures have seen choppy trade today, with December through July futures favoring the upside and deferred months the downside.

  • Traders are engaging in some light bull spreading as they ready positions for the weekend.
  • Encouraging this are ongoing concerns about tight supplies. With harvest wrapping up, some are storing corn, making it tough for end users to secure needs.
  • Emphasizing this is firmer Gulf basis levels for immediate delivery, as well as improvements in basis levels around the country.
  • But gains are being limited by news Japan's corn-for-feed use declined further in August. This keeps some attention on the fact that demand destruction has occurred.
  • Dollar strength and risk aversion amid disappointing home resale data for September is also limiting buying interest.

 

Soybean futures continue to chop within a very narrow range. Nearby contracts have a slight downside bias.

  • Soybean futures have seen light followthrough buying at times today, but traders are hesitant to add risk ahead of the weekend.
  • While the market continues to hear reports that yields are "better than expected," supplies are still tight. And demand has remained strong, signaling more rationing is needed.
  • Gulf basis levels are softer for immediate delivery this morning, however, signaling the recent rally encouraged some farmer selling.
  • But South American bean production is expected to be record-large. This is making it difficult for soybeans to find sustained buying interest, despite the fact these supplies (if realized) will not come available until early 2013.

 

Wheat futures have extended early gains to trade roughly 8 to 11 cents higher in Chicago and Kansas City while Minneapolis wheat is seeing slightly lighter gains.

  • Wheat futures have been the upside leader this morning on news Ukraine will reportedly ban wheat exports starting Nov. 15. Ukraine's ag ministry today said the country's wheat stocks may be exhausted by Nov. 15-20.
  • Also this morning, USDA announced export sales of 230,000 MT of wheat to unknown destinations for 2012-13.
  • This, along with yesterday's above-expectation weekly wheat export sales, fuels ideas U.S. wheat may be starting to benefit from the tightening global stocks situation.

 

Live cattle futures are posting slight gains in most contracts this morning. Conversely, feeder cattle futures are favoring the downside in early trade.

  • Cash cattle trade is not expected to get underway until this afternoon, but it is widely expected to take place above last week's mostly $125 trade.
  • Packers in Nebraska have raised bids for dressed cattle to $195 -- $2 above trade there last week -- but feedlots continue to pass on these prices.
  • Feedlots' bargaining power stems from consistent strength in the boxed beef market this week and tighter showlist estimates. Yesterday Choice values rose $1.10 and Select cuts rose 13 cents. Movement was decent at 167 loads.
  • This afternoon's Cattle on Feed Report is also expected to favor market bulls, with all categories expected to come in below year-ago levels.
  • Feeder cattle futures are seeing light profit-taking as corn is currently favoring the upside.

 

Lean hog futures are enjoying slight to moderate gains this morning, with nearby contracts the upside leader.

  • Lean hog futures are benefiting from corrective short-covering ahead of the weekend.
  • The hog market has recently faced pressure due to ideas it may be working on a top as supplies continue to rise seasonally and the rally is contrary to the seasonal trend.
  • Adding to such ideas, the pork cutout value slid 92 cents yesterday though movement was solid. This trimmed packers' profit margins.
  • But it's still profitable for packers to keep kill lines full, so downside risk is limited. Traders will keep a close eye on the cash hog and pork markets for any signs this is changing.
  • Also limiting gains are expectations Monday's Cold Storage Report will show record-large frozen pork stocks for the end of September.
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