HOG PRODUCERS: HEDGE 25% OF 2ND-HALF PRODUCTION... Following a very strong rally from the early spring lows, hog futures are signaling a top is in the works. With seasonal patterns also pointing to a top soon, we advise hog producers to hedge 25% of expected 3rd-qtr. production in August lean hog futures and 25% of expected 4th-qtr. production in December lean hogs. Be prepared to increase hedge coverage if futures confirm a market top.
Corn futures continue to see bull spread unwinding with the nearby July down 9 cents and new-crop contracts around 1 cent lower.
- Position squaring ahead of the weekend following the Thursday's volatile dollar-driven action continues to dominate. Traders are also starting to look ahead to Monday's Crop Condition update and the Acreage and Grain Stocks Reports from USDA next Friday.
- Rains have swept across Minnesota and northeast Iowa and Wisconsin this morning, again halting fieldwork in those regions. But the trade views the rains as a positive for crop development.
- The trade also views positively the forecast for another 2 to 4 inches of rain forecast for the region over the next five days to be followed by above-average temps for much of the Corn Belt over the 6- to 10-day outlook.
- Gulf basis is steady in late-morning trading after a 1- to 2-cent slide for near-term delivery in early morning trade.
Soybean futures are 2 to 6 cents weaker in quiet trade.
- Trade activity has settled down following yesterday's highly volatile day. A limited amount of bull spreading is underway, though at lower prices.
- Traders are looking ahead to the Monday's Crop Condition update, expecting favorable news following warmer temperatures this week and recent rains with projections of more on the way.
- Traders will start looking ahead to next Friday's major USDA reports which will list supplies on hand June 1 and planted acreage. But the Acreage Report will not be the final answer as a large percentage of the crop was still unplanted at the time the survey was taken.
- Dollar strength is adding light pressure as it makes U.S. soy products less competitive. News a South Korean feedmiller bought 55,000 MT of Argentine soymeal is a reminder of this.
- Gulf soybean basis is listed as unchanged in late-morning trade.
Wheat futures are mixed with a firmer tone in Chicago and Minneapolis, while Kansas City futures are mostly 3 to 4 cents higher.
- Futures are slightly higher as traders factor in reports of poor harvest results in southern Kansas. There is also some light short-covering due to crop concerns in the Northern Plains. USDA will provide an update on crop conditions Monday.
- A firmer dollar is limiting buying interest.
- News Russia raised its grain production forecast by 2 MMT to 95 MMT, including 54 MMT in wheat production, is also limiting buying interest.
- Gulf basis is steady with the exception of the July delivery which is 1 cent weaker.
Live cattle futures are moderately to sharply higher, while feeder cattle futures are enjoying slight gains.
- Short-covering and technical-related buying are lifting live cattle futures. A move by the August contract above the 50-day moving average has triggered buying interest.
- Traders are also positioning themselves for the release of the Cattle on Feed Report and the start of cash cattle trade.
- The report is expected to show all categories below year-ago, with Placements expected to set the tone of the report. There is a wide pre-report trade guess for this category ranging from 84.3% to 99.8% of year-ago levels, signaling this will be the wildcard.
- The Choice boxed beef market firmed 24 cents and the Select rose 53 cents this morning but movement is a slim 79 loads.
- Packers in the Southern Plains are reported offering $116 to $117 while feedlots are asking $121.
Lean hog futures continue to trade moderately lower at midday.
- Profit-taking is dominating trade following the strong gains this week.
- Traders are also concerned the market may be topping and are reluctant to push prices higher.
- Traders are also evening positions ahead of today's USDA's Cold Storage Report, which is expected to show record-large frozen pork stocks for the end of May.
- Selling interest is being limited by a $1.60 gain in the pork cutout this morning and decent movement of 176.5 loads.
- The July contract continues to trade a near-$5 discount to cash, which is limiting downside pressure.