ADVICE -- LIVESTOCK PRODUCERS: EXIT 4TH, 1ST QTR. MEAL HEDGES...
Soybean meal futures have done a lot of technical damage since Friday. With key support levels breached and Brazilian weather improving, the market is susceptible to more heavy selling pressure near-term. As a result, livestock producers are advised to exit the 50% 4th-qtr. coverage in long Dec. meal futures and the 25% 1st-qtr. coverage in March meal futures.
The sharp price break will eventually create a better buying opportunity, but we'll wait for the market to signal a low has been posted before reentering long coverage.
Corn futures have softened to post losses between 19 and 23 cents.
- As spillover pressure from soybeans mounted, corn futures violated sell-stops to accelerate losses. The dollar's move into positive territory was also encouraging of this.
- USDA report data Friday indicated that while supplies are tight, they are not as small as earlier thought. Thus traders are taking some profits today.
- But recent steady to firmer Gulf basis levels remind the market that Japan is buying U.S. corn due to shipping delays in Brazil.
- But overall export demand has generally remained lackluster.
Soybean futures have plunged 40-plus cents lower in all but far deferred months, which are 30-plus cents lower.
- Early pressure on soybean futures triggered sell stops. Nearby contracts are now nearing the psychological $14.00 resistance mark.
- Pressure came from followthrough selling after USDA raised both its carryover and production forecasts more than expected Friday.
- In addition, weather prospects have improved notably for Brazil with dry areas receiving rain and soggy areas benefiting from a drier forecast. This makes a record-large bean crop more likely, which eases supply concerns.
- The market needs fresh demand news to stem losses. The steady stream of such news has recently run dry for beans.
- According to official Chinese customs data, the country imported 4.03 MMT of soybeans in October, which is a 19% decline from September but a 6% increase over year-ago.
Wheat futures have extended early losses to trade 20-plus cents lower at all three locations with Chicago and Kansas City wheat mostly 27 to 29 cents lower.
- On Friday, wheat futures tested the top of their downtrending channel. As has been the trend, the market reversed course today and is likely now headed for a test of downtrending support.
- Spillover from corn and soybeans and a higher-than-expected carryover estimate from USDA Friday is adding pressure.
- But the market's downside risk is likely limited due to tightening global wheat stocks amid production concerns in areas such as Australia, the Black Sea region and the U.S.
- Traders have to wait until tomorrow for USDA's Crop Condition Report, which is expected to reflect further deterioration in the crop.
Live cattle futures continue to post slight losses in most contracts. Feeder cattle futures are enjoying slight to moderate gains.
- Traders in the live cattle market continue to engage in light profit-taking after $1 to $2 lower cash cattle trade at $124 to $126 on the Plains last week.
- Outside markets have also weakened to favor market bears. The stock market and crude oil futures are under pressure, while the dollar is firmer.
- Conversely, improvement in the boxed beef market this morning is limiting selling interest. Choice cuts rose $1.50 and Select cuts firmed 20 cents. Movement was solid at 101 loads.
- Expectations Friday's Cattle on Feed Report will reflect tightening supplies is also limiting selling interest.
- Weakness in the corn market has encouraged light short-covering in feeder cattle futures after heavy losses last week.
Lean hog futures remain under slight pressure.
- A few plants are closed in honor of Veterans Day, limiting demand for seasonally expanding supplies.
- Early cash hog bids are mostly steady, with a few bids on either side of unchanged.
- Packers are enjoying wide profit margins, which gives them incentive to keep slaughter runs full. However, retailer demand typically softens ahead of the holidays, adding a note of caution.
- But USDA's forecast for pork production to decline into year-end while exports are expected to rise next year limits downside risk.
- Pressure on December futures also remains limited by the discount it holds to the cash hog index.
- Pork prices softened Friday, but this encouraged strong movement. Pork movement this morning is off to a solid start.