Market Snapshot, Noon CT -- (Advice) -- January 10, 2014

January 10, 2014 05:52 AM

Hog producers: Claim profits on 1st-qtr. hedges... A seasonal low is past due in the hog market. While February lean hog futures continue to hold around a $5 premium to the cash index, cash hog bids are starting to inch higher and market-ready supplies should gradually ease. As a result, hog producers are advised to claim profits on the 50% 1st-qtr. Hedges in February lean hog futures.

Corn futures are posting double-digit gains in the front months in reaction to today's USDA reports which are viewed as "friendly."

  • Corn futures rose as today's USDA reports came in below trader expectations in terms of both 2013 annual production and Dec. 1 grain stocks.
  • Dec. 1 corn stocks in all positions of 10.4 billion bu. represents record usage for the first quarter and came in well below expectations.
  • But with carryover still up substantially from year-ago, traders are reminded that corn prices will have to continue to attract demand.
  • Offering some support earlier today was USDA's announcement that an unknown destination purchased 180,000 MT of corn for 2013-14.
  • Weakness in the U.S. dollar index due to a shockingly low jobs number is also supportive to corn futures.

Soybean futures are higher in reaction to today's USDA's reports.

  • Soybean futures are stronger on spillover strength from corn futures and as key supply figures from USDA's barrage of reports came in on the light side of expectations.
  • Futures are also gaining support from the steep decline in the U.S. dollar index due to the low jobs report.
  • USDA pegs the 2013 soybean crop at 3.289 billion bu., which was above expectations, but carryover was unchanged for the month at a tight 150 million bushels.
  • Soybean stocks as of Dec. 1 of 2.15 billion bu. came in slightly below expectations.
  • Futures are also finding support from news China's soybean imports for December of 7.4 MMT were a record monthly high. Imports for the year of 63.38 MMT were a record high and up 8.6% from the year prior.
  • In addition, news China purchased 216,000 MT of soybeans for 2014-15 is also supporting today's gains.
  • Gulf soybean basis slid 5 cents for January delivery this morning.

Wheat futures are sharply lower in reaction to a rise in carryover. SRW wheat is down 10 to 12 cents, HRW is down 5 to 9 cents, and HRS is 3 to 5 cents lower.

  • Wheat futures fell sharply following the release of today USDA reports which 2013-14 carryover of 608 million bu., coming in above traders' expectations.
  • Global 2013-14 carryover rose by 2.62 MMT 185.4 MMT to reflect a plentiful supply situation.
  • This negative data is offsetting the smaller-than-expected winter wheat seedings peg of 41.892 million acres. Traders expected the data to reflect an increase from year-ago, but instead acreage is lower.
  • The negative reaction to the USDA reports wiped our early strength due to the weaker dollar and news Venezuela purchased 125,700 MT of U.S. wheat for 2013-14.

Live cattle futures are mixed as traders wait on cash trade, with feeders weaker.

  • Live cattle futures are seeing a choppy tone as traders wait on active cash cattle trade.
  • But strength in the beef market is limiting pressure. Choice beef is up $2.56 and Select beef is $2.43 higher. Movement is a light 68 loads this morning, however.
  • The stronger wholesale market and a few record-setting sales in the dressed market in Nebraska and Iowa at $222 and $220, respectively, have traders looking for an increase in cash cattle prices in the Southern Plains.
  • Sales took place at mostly $137 in the Southern Plains last week; futures are just slightly below these prices, signaling some concerns a top may be near.
  • The recent strength in the wholesale beef trade has improved packer profit margins significantly, but they remain in the red.
  • Gains in corn futures have turned feeder cattle futures lower.

Lean hog futures are slightly to moderately higher, with February futures leading gains.

  • The failure by front-month futures to followthrough on its downside breakout yesterday has prompted more short covering today.
  • The sharp declines in the dollar is also encouraging short-covering.
  • Traders are also encouraged by the fact that other contracts were able to respect near-term support levels.
  • However, the pork cutout value fell $1.34 this morning, but movement is positive at 238.9 loads.
  • Packers continue to enjoy profitable margins, although they have tightened this week. Nevertheless, bids are steady to lower as Saturday's kill is expected to be lighter than earlier anticipated.
  • Wintry precip could slow hog movement in the Corn Belt today.
  • Today's strength leaves the cash hog index at nearly a $6 discount to the February contract.
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