Market Snapshot, 10:00 CT (VIP) -- September 20, 2012

September 20, 2012 05:05 AM
 

 

A surge in the U.S. dollar index and losses in the stock market is encouraging profit-taking in the commodity sector today after the release of disappointing U.S. labor data and Chinese manufacturing data that reflects ongoing contraction in the sector.

Corn futures remain mostly 2 to 5 cents lower, with nearbys leading to the downside.

  • A marked slowdown in weekly corn export sales to just 69,900 metric tons (MT) for 2012-13 shows that high prices are deterring buying interest.
  • Adding to such ideas is news Japanese corn use in feed fell to a 20-year low in July.
  • Plus, mostly dry conditions in the Corn Belt means harvest is advancing at a rapid pace and considering the drought-stricken state of the crop, farmers are less likely to store it.
  • But steady to firmer Gulf basis levels emphasize that supplies are tight, which is limiting selling pressure.

 

Soybean futures have softened to post losses in the teens in the November through March contracts; far deferred months are seeing lighter losses.

  • Harvest is underway and the price structure of the market signals many will market their crop straight off the field. Plus, many producers have switched their harvest efforts from corn to beans for the time being.
  • Dollar strength and yesterday's gains are also encouraging profit-taking.
  • This is outweighing strong weekly soybean sales of 712,200 MT for 2012-13 and 5,500 MT for 2013-14 for the week ended Sept. 13 -- coming within expectations. Sales of soy products were also strong and topped expectations.
  • Export commitments for the new marketing year are running 42% ahead of year-ago; USDA projects exports in 2012-13 to be 22.4% below the previous marketing year.

 

Wheat futures have rallied to post gains ranging from 1 to 7 cents in most contracts at all three locations. Scattered selling is being seen in the deferred contracts.

  • Initially, signs of economic weakness in China, the U.S. and Europe and the resulting dollar strength encouraged profit-taking following yesterday's strong gains. But this has given way to bargain buying.
  • Global wheat supply prospects have tightened. Adding to such concerns is the U.S. Climate Prediction Center's extended weather outlook that predicts drought will persist across the Plains through December. This would be detrimental for the winter wheat crop.
  • Plus, Japanese wheat-for-feed use increased, emphasizing how wheat stands to benefit from lofty corn prices.
  • Weekly wheat sales of 488,900 MT met expectations.

 

Live and feeder cattle futures are posting slight losses on spillover from negative outside markets.

  • Yesterday, the boxed beef market again exhibited strength as Choice values rose 65 cents and Select cuts fell 4 cents on impressive movement of 225 loads.
  • But profit-taking in futures shows traders are skeptical packers will again raise bids in light of negative profit margins and beef prices that have trimmed demand in the past.
  • A much lower-than-normal weekly beef export sales tally of 10,900 MT also raises concerns that lofty beef prices are slowing demand.
  • Sharp gains in the U.S. dollar index is also limiting buying interest in cattle futures.

 

Lean hog futures are off to a mixed start with most contracts favoring the downside amid profit-taking.

  • Lean hog futures have seen some light short-covering at times today thanks to continued improvement in the cash hog market. Packers are keeping bids steady to firmer as they work to secure supplies for what is expected to be another large weekend kill.
  • But ongoing weakness in the pork market will limit gains in the cash market. Yesterday, the pork cutout value slid 88 cents, though this encouraged strong movement of 115.6 loads.
  • Dollar strength and the steep premium nearby futures hold to the cash hog index is adding light pressure.
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