Market Snapshot, Noon CT -- Advice -- (VIP) -- April 24, 2013

April 24, 2013 07:03 AM
 

COTTON HEDGERS: HEDGE 50% OF 2013-CROP... December cotton futures are signaling a major technical top is in place, which opens sharp downside price risk. As a result, cotton hedgers were advised at midday to hedge 50% of expected 2013-crop production in December cotton futures. Our fill on the position was 83.87 cents. Combined with previous 50% cash forward contract sales, hedgers now have 100% of downside price risk covered for new-crop production.

Corn futures have seen choppy trade at times this morning, but most contracts are currently fractionally to 3 cents higher.

  • Corn futures continue to see light, corrective short-covering. But that is the extent of buying interest for the time being as the forecast for drier, warmer weather has eased concerns about planting delays.
  • Recognition that recent freeze events have likely caused significant damage to an already drought-stricken HRW wheat crop is adding light support, as this could translate to increased corn for feed use.
  • Also, ethanol production last week rose 2.5% to 853,000 barrels per day, according to data from the Energy Information Administration. Ethanol stocks rose 100,000 barrels last week to 17.6 million barrels. A Missouri Poet plant came back on line last week after being idled since February due to tight supplies and maintance.
  • Tight old-crop supplies also remain an underlying source of support.Soybean futures are posting losses around 6 to 13 cents with old-crop futures leading losses at midday.
  • Concerns about the spread of the H7N9 bird flu and its economic and feed implications for the country remain a source of pressure on beans.
  • Beans are also seeing some light bull spread unwinding today.
  • Also, traders expect actual soybean plantings to top USDA's March projection thanks in part to corn planting delays in the upper Midwest and the South.
  • Demand uncertainty also remains a source of pressure. While USDA announced another daily sale to unknown destinations for 116,000 MT of new-crop beans today -- the third daily sales announcement this week -- traders expect demand for old-crop U.S. soy to slow as South American supplies are now available.
  • A 5-cent surge in Gulf basis for early May delivery signals more such announcements may be ahead.
  • Statistics Canada says Canadian producers intend to plant 19.133 million acres to canola, which came in below expectations of 20.3 million acres.

 

The wheat complex has softened to trade roughly 6 to 8 cents lower in Chicago and around 2 to 4 cents lower in Kansas City and Minneapolis wheat.

  • Pressure stems from Statistics Canada data indicating producers plan to plant 26.618 million acres to wheat in 2013, which topped expectations and represents a 12.3% increase over last year.
  • Ukraine has lifted its ban on wheat exports, as expected. Volume is not expected to exceed 200,000 MT however.
  • Traders are brushing off another major freeze event overnight that likely took a bite out of crops in Texas, Oklahoma, Kansas and New Mexico. This follows other freeze events the past few weeks.
  • The market may begin focusing more so on the poor condition of the HRW crop with the start of the Wheat Quality Council's wheat tour next week and the calendar flip to May.
  • Pressure on Minneapolis wheat is being limited by planting delays in the Northern Plains.

 

Live cattle futures continue to enjoy moderate gains in most contracts, while feeder cattle futures are sharply higher.

  • Live cattle futures continue to benefit from ideas the boxed beef market may be working on a seasonal low as temps are expected to warm up in the weeks ahead. But in light of recent beef demand struggles, a fair amount of uncertainty exists.
  • This morning, Choice boxed beef prices slid 11 cents while Select firmed $1.24, and movement was impressive at 150 loads.
  • Late-week cash cattle trade is expected as packers have yet to place bids. Last week, trade took place at mostly $126 to $127, with sales in Texas at mostly $126 and in Kansas at $126.50.
  • Beef strength works to feedlots' advantage. On the other hand, heavier showlist estimates and negative cutting margins will make packers unwilling to pay higher prices this week.
  • Feeder cattle futures are enjoying technical buying amid ideas the downside has been overdone -- especially considering tightening supply prospects.

 

Lean hog futures are moderately to sharply higher in most contracts at midday.

  • Lean hog futures are benefiting recent improvement in the product and improvement in the cash hog market today.
  • Pork demand appears to be on the mend and the forecast for warmer weather should encourage consumers to fire up the grills.
  • This morning, the pork cutout value fell 67 cents, but movement was impressive at 322.8 loads.
  • Cash hog bids are steady with a few firmer bids today as packers have seen profit margins improve in recent days and supplies are tightening seasonally.
  • Traders appear unconcerned about the $7-plus premium the May contract holds to the cash hog index, signaling they expect the cash market to continue to firm.
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