Market Snapshot, Noon CT -- Advice (VIP) -- November 5, 2013

November 6, 2013 06:05 AM
 

COTTON HEDGRS: CLAIM PROFITS ON 2013-CROP HEDGES… Cotton futures are signaling a short-term low may be in the works after extended price pressure. While we expect USDA's reports Friday to be neutral to negative for cotton futures, we aren't willing to risk profits that have accumulated on the 2013-crop hedges. Hedgers are advised to claim profits on the 50% hedges in Dec. cotton futures. If Friday's reports are highly bearish, we'll look to reestablish the short hedge coverage.

Corn futures are around 3 cents lower across the board.

  • The pervasive bearishness in corn futures continues, with prices moving to a new three-year low.
  • Weakness in the U.S. dollar index is providing some light support.
  • Funds have stopped adding to their record short position ahead of Friday's Crop Production and Supply & Demand Reports but so far have shown no inclination toward covering those shorts and evening positions ahead of the reports.
  • Meanwhile, the market expects USDA to raise its corn production estimate to 14.022 billion bushels.
  • Lanworth expects corn production of 13.95 billion bu. with a national average yield of 157.5 bu. per acre. The firm also raised its world 2013-14 corn production outlook by 3 MMT to 958 MMT on expectations for larger crops in the U.S. and Ukraine.
  • Brazilian media reports China has agreed to allow imports of Brazilian corn. China sources the bulk of its corn imports from the U.S., but Brazil's ag ministry expects China to eventually buy up to 10 MMT of Brazilian corn each year.
  • Ethanol production fell 9,000 barrels per day (bpd) to 902,000 bpd the week ended Nov. 1. Ethanol stocks rose 204,000 barrels to 15.17 million barrels.
  • Gulf basis has firmed to 2 cents higher for November delivery in late-morning trading but is a penny lower for December delivery. Basis is unchanged for January and later delivery.
  • News China National Grains and Oils Information Center does not expect corn imports to exceed 5 MMT adds light pressure.

 

Soybean futures are 1 to 3 cents higher this morning.

  • Corrective short-covering along with weakness in the U.S. dollar index lifted soybean futures in early trading this morning but buying interest has eased since the early gains.
  • Traders are looking ahead to USDA's reports due Friday, which means buying interest outside of positioning evening will remain limited.
  • Pre-report expectations are for USDA to forecast soybean production at 3.225 billion bu. on a national average yield of 42.5 bu. per acre.
  • Lanworth expects U.S. soybean production of 3.293 billion bu. with a national average yield of 42.7 bu. per acre. The firm also raised its global production forecast on expectations for a larger U.S. crop by 2 MMT to 290 MMT.
  • Gulf basis remains a penny higher for November delivery in late-morning trade and is unchanged for later delivery periods.

 

Wheat futures have weakened further with SRW 1 to 4 cents lower, HRW 4 to 6 cents weaker and HRS mostly 2 cents lower.

  • The heavy bearishness in the corn market has spread to the wheat market in recent days.
  • Traders are shrugging off a weaker U.S. dollar index.
  • The winter wheat growing season is off to a favorable start, which is keeping attitudes negative toward prices. However, a hard freeze warning for some areas of Kansas is in effect today.
  • Anticipation of USDA's reports on Friday also has traders reluctant to add positions.
  • Lanworth left its world wheat production estimate unchanged from last week at 707 MMT.
  • An official with the China National Grains and Oils Information Center (CNGOIC) today pegged that country's 2013 wheat imports at 5 MMT, a figure largely factored into the market.
  • Gulf SRW basis is unchanged at midday.

 

Live cattle futures are trading slightly higher in the front three contracts while feeder cattle futures are slightly to moderately higher.

  • Live cattle futures have edged back to the plus side after opening slightly weaker.
  • Uncertainly over likely cash cattle trade has the market unwilling to press prices either higher or lower.
  • Traders are cautious as showlist estimates are up at all locations this week.
  • Providing light pressure is the $1.51 decline in Choice boxed beef this morning. But Select rose 60 cents and movement was an encouraging 121 loads.
  • Initial asking prices are above the bulk of last week's trade at $132, while early bids are around $130 in Nebraska and $129 in Texas.
  • Selling is also being limited by news Russia will lift its ban on U.S. beef.
  • Feeder cattle futures are higher on weaker corn prices and losses in the U.S. dollar index.

 

Lean hog futures remain slightly to moderately lower after gapping lower on the open.

  • Lower cash hog prices and declines in the pork cutout value prompted the gap-lower opening. Futures are attempting to fill that gap.
  • The pork cutout value fell another 69 cents this morning, but movement surged to 323.1 loads.
  • Cash prices have moved lower on rising numbers and rising average weights, which traders view as a negative going forward, despite positive packer profit margins.
  • Average hog weights in Iowa and southern Minnesota rose 1.9 lbs. the week ended Nov. 2, confirming building supplies.
  • The December lean hog contract continues to trade in line with the cash hog index, which is limiting both buying and selling interest.
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