Market Snapshot, Noon CT -- Advice (VIP) -- June 6, 2013

June 6, 2013 07:17 AM
 

SOYBEAN PRODUCERS: INCREASE 2013-CROP CASH SALES... While there are serious planting delays across the Corn Belt, we still firmly feel price strength in the soybean market must be rewarded with sales. With November soybean futures falling back into the long-term downtrend, the recent push above that level looks like a bull trap. Soybean hedgers and cash-only marketers are advised to make a 10% 2013-crop cash forward contract sale for harvest delivery to get to 20% sold in the cash market on expected new-crop production.

Hedgers should continue to hold the 50% hedge in November soybean futures. With November beans looking technically toppy, we expect to see additional near-term price pressure that will allow us exit the hedge with less of a loss than at current levels.

Corn futures have firmed to post gains of 2 to 3 cents in most contracts.

  • New-crop corn futures are seeing some short-covering after this week's slide. Also, the December contract is finding buying support at the top of the May 28 upside gap at $5.54 1/4.
  • Gains in old-crop futures are restrained by the reminder of price rationing of tight old-crop supplies from this morning's Weekly Export Sales Report, which included sales of 107,200 MT for 2012-13 and 51,600 MT for 2013-14 -- short of expectations and week-ago. China was notably absent from the list of buyers.
  • New-crop corn is gaining some support from the lingering delays in corn planting and forecasts for more rain this week in the western Corn Belt.
  • A plummeting U.S. dollar index is also supportive.
  • Gulf basis is steady for June delivery after a 3-cent slide early this morning. Basis is a penny stronger for July delivery, 10 cents lower for the August and a penny higher for September and October delivery at midday.

 

Soybean futures are narrowly mixed after trading as much as double-digit lower in deferred contracts.

  • Soybeans continue to see some profit-taking, but the dip in prices has uncovered buying interest at the old $12.80 resistance area for November beans.
  • The weaker dollar is supportive, but this morning's weekly export sales data showed demand slowing for old-crop beans. Sales totaled 48,400 MT for 2012-13. New-crop bean demand remained solid at 589,900 MT for 2013-14 delivery, however, and the overall tally met expectations.
  • Weekly soymeal export sales came in well above expectations at 134,200 MT for 2012-13 and 137,100 MT for 2013-14. Weekly soyoil export sales also improved from recent weeks to 30,500 MT.
  • Gulf soybean basis is unchanged are softening by 5 cents for immediate delivery in early morning trade.
  • Talk increased a little that delayed corn planting will lead to increased soybean acres but the continuing delays in soybean planting has others concerned about eventual yield loss.

 

Chicago and Kansas City wheat have softened to trade 4 to 7 cents lower, while Minneapolis wheat is now mixed.

  • Wheat futures have softened along with the U.S. dollar index at midday.
  • But this morning's weekly wheat export sales topped expectations as a net sales reduction of 33,200 MT for 2012-13 was more than offset by sales of 664,900 MT for 2013-14. This is helping to limit pressure.
  • News South Korea is expected to receive its first cargo of U.S. wheat since the GMO wheat discovery in Oregon has eased concerns that this could have a major impact on U.S. wheat exports.
  • Weather continues to pressure Kansas City wheat futures as recent rains have improved the drought picture.
  • On the other hand, wet conditions on the Northern Plains provides support for Minneapolis futures due to delayed planting and crop progress.

 

Live cattle futures remain slightly higher at midday, while feeder cattle futures have reversed early losses to trade slightly higher.

  • June and August futures are up as traders make some effort to align futures prices with cash expectations. The June contract continues to trade at a $3 to $4 discount to cash prices.
  • Choice boxed beef cuts fell another $1.32 cents today while Select rose 28 cents. Movement is a modest 104 loads.
  • The downturn in dressed beef prices is trimming positive packer profit margins, making them less likely to bid aggressively for supplies.
  • Also, weekly beef exports for the week ended May 30 fell 6,200 MT from the week prior to 12,800 MT. However, beef prices have since softened.
  • Firmer live cattle prices and the weaker U.S. dollar index are lifting feeder cattle futures despite the slight upturn in new-crop corn futures.

 

Lean hog futures are moderately to sharply higher this morning.

  • Futures gapped higher on recent strong pork movement in the face of rising wholesale pork prices and have held near the highs of the day. The gap higher left a four-month island bottom. The July contract is attempting to fill a downside gap left Feb. 5 at $96.40.
  • Traders are ignoring the $1.62 decline in the pork cutout value this morning as movement was an impressive 257.8 loads.
  • But despite recent pork market improvement, packer profit margins remain in the red. Thus, some packers are trimming kill hours and keeping bids lower in an effort to improve margins. Others in need of tightening market ready supplies have had to raise bids.
  • Traders are not overly concerned about an 8,500 MT decline in pork export sales for the week ended May 30 to 6,600 MT.
  • Futures are also finding support from the weaker U.S. dollar index and stronger August live cattle futures.
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