The government's inability to agree on a plan of taxation and spending cuts is leading to a "risk-off" day in the markets. Investors say the level of uncertainty surrounding the impact on the U.S. and global economy to the "great sequestration" is high and is causing them to limit their risk exposure and see "safe haven" investments such as the U.S. dollar index, which is sharply higher this morning. Click here for more on the outside markets.
Corn futures are 3 to 5 cents lower this morning amid dollar strength and spillover from neighboring pits.
- Following yesterday's strong gains in old-crop contracts, corn futures are seeing light profit-taking pressure.
- Gulf corn basis is 2 cents higher for immediately delivery to stand 58 cents above March futures. Basis is 64 cents above May futures for April delivery.
- Strong country and Gulf basis levels signal prices have returned to levels that attract demand.
- But the "risk-off" atmosphere in the market will make it difficult for bulls to gain traction.
Old-crop soybean futures are 11 to 15 cents lower, with new-crop down 3 to 6 cents.
- Strength in the dollar index is weighing on the soy complex this morning and leading to profit-taking.
- While no technical chart damage has been done to old-crop contracts this week, November bean futures are pivoting around the November low and working on losses for the week.
- Continued strong demand for old-crop U.S. soybeans has given bulls traction at times this week, as global end-users are growing impatient with South American shipping delays.
- Meanwhile, China's demand for new-crop U.S. beans improved this week. USDA announced a 120,000-MT soybean sale to China for 2013-14. For the week, USDA has announced 363,000 MT in new-crop soybean sales to China.
Chicago wheat is mostly 5 to 6 cents lower, with Kansas City down 4 to 10 cents while Minneapolis wheat is mixed.
- Chicago wheat is seeing spillover from neighboring pits. March corn futures, however, have widened the premium it holds to March Chicago wheat this morning.
- News China will sell 1.285 MMT of wheat next week to cool domestic prices is adding to the negative tone.
- Also this morning, Ukraine has signaled it will begin exporting wheat in April as it will have around 2 MMT of exportable supplies in positions by then.
Live cattle futures are called mixed, with pressure limited by higher cash cattle trade.
- A choppy day of trade is likely ahead for live cattle futures, with buying limited by the "risk-off" trading atmosphere.
- However, traders are encouraged by news of $128 cash cattle trade in Kansas yesterday, which is up $3 from the top of last week's range and leads to expectations of similar followup sales today.
- Also lending to expectations a near-term low has been posted is this week's strength in the boxed beef market.
- Weakness in the corn market could trigger some short-covering in feeder cattle futures, but lackluster calf demand has resulted in a softer tone in the cash market this week.
Lean hog futures are expected to favor a weaker tone due to demand concerns.
- While packers have seen profit margins improve dramatically this week, demand for cash hogs remains lackluster, which points to a slowdown in pork demand.
- The cash hog market is called steady to lower again today as packers are planning for a smaller-than-usual Saturday kill.
- Meanwhile, lean hog futures are severely oversold according to the 9-day Relative Strength Index, which points to the need for a time or price correction, but also signals attitudes are increasingly bearish.