Market Snapshot, 8:30 am CT (VIP) -- December 3, 2012

December 3, 2012 02:42 AM
 

Corn futures have mildly extended gains from earlier to trade 4 to 9 cents higher.

  • Corn futures are being supported primarily by spillover. Soybeans and wheat are firmer, while the U.S. dollar is weaker amid a general risk-on attitude.
  • Additional support for corn is coming from South American weather. Conditions remain too wet in Argentina, which is causing traders to believe some intended corn acres will eventually be switched to soybeans. Also, dryness is a concern in southern Brazil even though this area got some scattered rains over the weekend.
  • Gulf basis is steady to weaker, while interior basis is narrowly mixed to start the week.

 

Soybean futures are maintaining gains in the 12 to 17 cent range.

  • Traders continue to watch for signs of Chinese demand. State-run China National Grain and Oils Information Center confirms Chinese crushers are stepping up purchases of soybeans despite negative margins as they prepare for the peak consumption season during the Lunar New Year celebration in February. This has traders expecting additional purchases, especially after talk last week that Chinese crushers still need 3 MMT to 4 MMT of soybeans for first quarter delivery.
  • The broad risk-on attitude in the investment world is also supportive. Investors are encouraged by upbeat manufacturing data out of China and a better sentiment in the euro-zone to start the week.
  • Scattered rains fell on dry areas of southern Brazil over the weekend, although dry conditions are expected to return this week. That's causing some concern as the pattern has turned drier the past several weeks. Northern production areas of central Brazil continue to see generally favorable conditions. Argentina remains too wet, with the central growing region in line for moderate to heavy rains again this week.

 

Wheat futures have mildly extended gains from earlier to trade 9 to 13 cents higher in Chicago, mostly 8 to 11 cents higher in Kansas City and mostly 9 to 11 cents higher in Minneapolis.

  • Fundamental support for wheat futures is coming from Egypt's weekend purchase of 400,000 MT of wheat, including 280,000 MT of U.S. supplies. The tender signals U.S. wheat is again competitive on the world market and Black Sea supplies are tight.
  • Outside markets are also supportive this morning. The U.S. dollar index is under pressure while commodities are generally firmer amid a broad, risk-on attitude.
  • Ongoing drought in the Plains is also supportive. There's very little chance of rains in the 10-day forecast and the long-term outlook also doesn't hold much hope of improvement.

 

Live cattle futures are expected to open steady to lower, although outside markets may cause traders to buy a weaker open.

  • Followthrough selling from last Friday's $2 to $3 lower cash cattle trade is expected to weigh on live cattle futures as the December contract is trading at a premium to the cash market. Traders will form this week's cash opinions on boxed beef trade and available market-ready supplies, but initial expectations are for lower cash prices again this week.
  • Supportive outside markets should limit selling and could trigger buying interest, especially if live cattle open weaker. Traders have a general risk-on attitude to start the week.
  • Feeder cattle futures are expected to open steady to weaker on expected weakness in live cattle and strength in corn.

 

Lean hog futures are seen opening the week with a mixed tone.

  • Choppy price action is likely to kick off the week in lean hog futures as traders gauge cash fundamentals against potential signs of a technical top.
  • Cash hog bids are expected to be steady to firmer across the Midwest as packer margins remain in the black.
  • December lean hog futures hold a premium to the cash index with less than two weeks until expiration, which could weigh on the front-month contract.
  • Outside markets should limit selling in hog futures and may trigger buying interest amid a broad risk-on attitude to start the week.
     
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