Corn futures are choppy in mixed trade as the market has recovered from mild losses immediately after USDA's reports were released.
- USDA's reports are deemed negative for the market, as figures came in above expectations. However, 2012-13 carryover at 647 million bu. still reflects a very tight supply situation and has helped to firm the market after an initial negative reaction.
- USDA raised the size of the corn crop by 19 million bu. from last month to 10.725 billion bushels. This came in above the average trade guess of 10.629 billion bushels.
- Strength in the U.S. dollar index comes amid more safe-haven buying as investors wait for President Obama's address today on the so-called fiscal cliff. Negative outside markets will make it more difficult for corn to see more than mild short-covering today.
Soybean futures softened sharply in reaction to USDA data, with contracts trading mostly 20-plus cents lower.
- USDA raised 2012-13 carryover by 10 million bu. from last month to 140 million bu., coming in around 7 million bu. above the average pre-report trade guess.
- USDA raised the size of the soybean crop by 111 million bu. from last month to 2.971 billion bu., coming in around 80 million bu. above the average trade guess.
- USDA left its 2012-13 Brazilian and Argentine soybean crop estimates unchanged at 81 MMT and 55 MMT, respectively. Brazil is set to overtake the U.S. as the number one producer in the globe for the first time in history.
- Strength in the U.S. dollar index is adding to weakness in the soy complex.
- January beans have filled the early July gap. A low-range close for the day would open considerable downside risk.
Chicago and Kansas City wheat futures are posting double-digit losses in most contracts in reaction to negative USDA data. Minneapolis is seeing lighter losses.
- USDA raised 2012-13 wheat carryover by 50 million bu. from last month to 704 million bu., which was more than traders expected.
- USDA also lifted 2012-13 global wheat carryover by 4.18 MMT from last month to 174.19 MMT, although this is still 12% lower than last season.
- Negative outside markets are adding to early weakness in the wheat pit. The U.S. dollar is stronger, while the U.S. stock market is lower this morning due to concerns with the looming fiscal cliff.
Live cattle futures are called mixed on tighter supply forecast.
- This morning USDA lowered its 2012 and 2013 beef production projections and raised its price forecasts for cash cattle both years. USDA trimmed its 2012 beef export forecast, but left its 2013 forecast unchanged.
- However, upside potential will be limited by weakness in the boxed beef market. Choice values slipped 69 cents yesterday and Select was down 21 cents. But movement has been strong this week, with 225 loads changing hands yesterday.
- Negative outside markets will also limit buying. The U.S. stock market is under pressure, which raises concerns about consumers tightening their purse strings and trimming their purchases of higher-quality meat cuts.
- Active cash cattle trade has yet to get underway, but early indications from light trade signals more $1 lower trade is likely today.
- Feeder futures are expected to be mixed on spillover from live cattle and short-covering that could be inspired by weakness in the grain markets.
Lean hog futures are expected to see a choppy start as traders weigh improved technicals against demand concerns.
- Focus in the hog pit this week has been on narrowing the discount December lean hog futures hold to the cash index. This has helped to lift the entire complex and improve the near-term technical outlook.
- December lean hog futures hold around a $2 discount to the cash index and have posted back-to-back closes above downtrending resistance drawn off March and July highs.
- The pork cutout value firmed 99 cents yesterday to improve packers' profit margins. This is expected to help stabilize the cash hog market to close out the week, although supplies remain plentiful.
- This morning USDA lowered its 2012 and 2013 pork production projections and made only minor adjustments to its price projections for cash hogs, but it raised its 2012 and 2013 pork export forecasts.