Market Snapshot, 8:30 am CT (VIP) -- February 7, 2013

February 7, 2013 02:43 AM
 

Corn futures remain mostly 4 to 5 cents lower as traders shed risk.

  • Focus in the corn pit is on evening positions ahead of tomorrow's USDA Supply & Demand Report, which is expected to reflect demand destruction.
  • While traders look for USDA to raise carryover by around 13 million bu. from last month, it's still reflective of a tight supply situation.
  • This morning's weekly export sales data showed sales of 168,900 MT for 2012-13 and net sales reductions of 8,500 MT for 2013-14. Combined, the tally came within dismal expectations.
  • But of note, China purchased 109,000 MT of old-crop corn, which included switches from unknown destinations. This explains last week's boost in Gulf basis.
  • Gulf basis is 1 cent higher this morning for immediate shipment; it stands 58 cents above March futures.

 

Soybean futures firmed immediately following this morning's weekly export sales report. Nearbys are 1 to 3 cents higher, with deferreds marginally to 9 cents lower.

  • Soybean futures were weaker overnight due to strength in the dollar index and forecasts for rains in southern Brazil and Argentina early next week.
  • However, hot and dry conditions this week in those areas of South America are increasing stress to the crop.
  • The weekly export sales data showed sales of 896,200 MT for 2012-13 and sales of 771,000 MT for 2013-14 -- coming in well above expectations.
  • Of note, China purchased 696,600 MT of old-crop soybeans, including switches from unknown destinations. Exports of over 1.5 MMT were up 37% from the previous week.
  • Traders' focus is also on evening positions ahead of tomorrow's USDA S&D Report, which is expected to show carryover tightened to under 130 million bushels. But traders also expect USDA to raise the size of the Brazilian bean crop.

 

Chicago wheat is 2 to 8 cents lower this morning, with Kansas City down most around a penny. Minneapolis wheat is mixed, with nearbys firmer and deferreds marginally lower.

  • Strength in the dollar index and weakness in the corn pit is weighing on Chicago wheat futures this morning.
  • Traders are shedding risk ahead of tomorrow's USDA S&D Report, which is expected to reflect a slowdown in demand. Traders look for USDA to raise carryover by around 12 million bu. to 728 million bushels.
  • Additional pressure is coming from a disappointing weekly export sales report. Sales of 290,800 MT for 2012-13 and sales of 10,000 MT for 2013-14 came at the low end of expectations.

 

Live cattle futures are expected to see a choppy start as traders wait on cash trade signals. Feeder futures should be supported by weakness in the corn market.

  • Live cattle futures are expected to be choppy today as traders wait on cash trade to develop. Bid and asking prices remain wide apart, signaling late-week cash trade is likely.
  • General expectations are for steady to $1 higher cash trade, but the boxed beef market was mixed yesterday -- raising concerns the market has not yet posted a seasonal low.
  • Still, the tightening supply situation should limit pressure on futures, as traders look for some revisions in USDA's S&D Report tomorrow to reflect recent developments such as an improved export forecast.
  • Feeder futures should be supported by weakness in the corn market.

 

Lean hog futures are called lower on weakness in the pork cutout market.

  • Pork cutout values slipped $1.75 yesterday to push packers' profit margins deeper into the red.
  • As a result, the cash hog market is called steady to lower again today and packers have reduced kill requirements as they work to improve margins.
  • Concerns about pork demand are expected to weigh on lean hog futures, although after yesterday's sharp losses, February hogs are trading at around a $3 discount to the cash index.
  • Followthrough pressure this morning would signal February hogs have posted a near-term high and open additional near-term downside risk.
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