Market Snapshot, Noon CT -- Advice (VIP) -- April 17, 2013

April 17, 2013 07:02 AM
 

 

SOYBEAN HEDGERS: HEDGE 50% OF 2013-CROP PRODUCTION

November soybean futures have violated key levels of support recently, opening sharp downside price risk on the daily chart. At the same time, it appears March planting intentions were the low-water mark for the year given corn planting delays. Plus, macro-economic concerns are building. As a result, soybean hedgers are advised to hedge 50% of expected 2013-crop production in November soybean futures. This is a defensive hedge, meaning we will exit the position if bullish momentum rebuilds.

COTTON PRODUCERS: MAKE A 25% 2013-CROP SALE
While the uptrend from the November low remains intact, December cotton futures are looking increasingly top-heavy. Plus, there's talk cotton won't lose as many acres to corn as indicated in the March planting intentions. Cotton hedgers and cash-only marketers are advised to sell another 25% of expected 2013-crop production via cash forward contract for harvest delivery to get to 50% forward sold.

Old-crop futures remain mixed, but the rest of the market has firmed to trade 6 to 8 cents higher.

  • Strength in the corn market is impressive considering sharp gains in the U.S. dollar index today and heavy stock market and crude oil futures losses.
  • Heavy precip is falling in the heart of the Corn Belt today and more is on the way. The most recent 6- to 10-day weather outlook has turned wetter; it now shows above-average precip chances for much of the Corn Belt and below-normal temps for most of the U.S.
  • This will make it tough for plantings to reach USDA's projected 97.3 million acres.
  • Weekly ethanol production last week declined 22,000 barrels per day (bpd) to 832,000 bpd. Ethanol stocks also fell by 300,000 barrels from week-ago to 17.5 million barrels.
  • This plus a softening in Gulf basis for near-term delivery today is putting light pressure on old-crop corn contracts.

 

Soybean futures have moved well off their lows to post slight gains in old-crop beans, while new-crop futures are mostly a penny lower.

  • Sharp gains in the U.S. dollar index and some bull spreading in beans is resulting in choppy trade.
  • Heavy rain in the Corn Belt this week and an extended forecast calling for more precip and chilly temps makes it likely some corn acres will be switched to beans. This is weighing on new-crop soybeans.
  • Meanwhile, the source of the Chinese bird flu has yet to the identified and the number of cases and deaths continues to rise. This is reducing the country's feed needs and thus remains an underlying source of pressure on soybean futures.
  • While Gulf soybean basis fell 3 cents for April delivery this morning, it firmed 6 cents for June delivery at midday. While supplies remain tight, export demand is expected to slow.

 

Wheat futures have extended early gains to trade mostly 7 to 9 cents higher in Chicago and Kansas City while Minneapolis is up 4 to 5 cents.

  • Minneapolis wheat is being supported by snow in the forecast for the Northern Plains. This plus existing snow is seen as causing additional spring wheat planting delays.
  • Light support for Kansas City wheat also stems from chances for sub-freezing temps in the Central and Southern Plains April 18-19.
  • Last week's freeze event is also starting getting more attention today. The full extent of the damage will not be known for some time.
  • The rally in wheat is especially impressive considering a sharply higher U.S. dollar index, which could limit wheat's attractiveness on the global export market.
  • Traders are disregarding recent improvement in soil moisture in winter wheat country.

 

Live cattle futures have surged to trade moderately to sharply higher. Feeder cattle futures have also improved to post moderate to sharp gains in most contracts.

  • Live cattle futures have improved after another jump in boxed beef movement and prices.
  • This morning, Choice cuts surged $1.51 and Select cuts rose 86 cents. More impressive, movement picked up 138 loads. This could signal retailers are finally stocking their meatcases for spring grilling.
  • So far, packers have held out in hopes of better prices than light sales at $125 Monday. This compares to trade at mostly $127 last week.
  • Recent heavy precip on the Central and Southern Plains has encouraged some cattle producers to increase production as pastures are expected to improve. This could result in tighter supplies.
  • The market will be given an update on the supply situation in Friday's Cattle on Feed Report.
  • Strength in cattle futures is especially impressive in light of marked dollar strength.

 

Lean hog futures have reversed course to post moderate to sharp gains in most contracts.

  • Lean hogs are benefiting from spillover from live cattle futures, ideas the downside has been overdone and signs pork demand is improving.
  • The pork cutout value firmed another $1.56 this morning on strong movement of 303.1 loads. This builds on gains earlier this week.
  • Nevertheless, packers are paying steady to lower prices for cash hogs as most are well supplied for the week and are working to improve margins that are just above breakeven.
  • Average hog weight data in southern Minnesota and Iowa signal some supply tightening is beginning as per the seasonal trend. Weights dropped 0.7 lbs. last week.
  • Traders appear comfortable leaving nearby contracts at a sharp premium to the cash hog index. This adds to ideas a seasonal rally may be ahead.
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