Market Snapshot, Noon CT -- Advice (VIP) -- October 16, 2013

October 16, 2013 07:05 AM
 

WHEAT PRODUCERS: INCREASE 2013-CROP CASH SALES... Wheat futures have rallied sharply since mid-September amid improving demand and global supply fundamentals. While the fundamental outlook remains supportive longer-term, the market has run out of fresh news needed to further extend the price correction and futures are rolling over. Therefore, wheat hedgers and cash-only marketers are advised to make a 25% cash sale on 2013-crop production. This pushes hedgers to 75% priced in the cash market and cash-only marketers to 50% sold for 2013 crop.

Corn futures are posting losses around a penny in most contracts.

  • The corn market is seeing light profit-taking today after posting slight gains in recent sessions. Strength in the U.S. dollar index on the Senate's announcement of a plan to reopen the government and kick the can down the road on the debt ceiling is adding pressure. This spurred optimism lawmakers may finally reach an accord.
  • Meanwhile, harvest is thought to be around a third complete and the forecast for the next two weeks is generally favorable for harvest activity. This, along with reports of better-than-expected yields, will make it tough for corn to find sustained buying interest.
  • But selling is also being kept in check by signs prices are rebuilding demand. Export sources confirmed to Reuters private Chinese firms have bought 300,000 MT of U.S. corn this week and are shopping for more. This follows reported sales of 420,000 MT of U.S. corn last week.
  • A 1-cent uptick in Gulf corn basis for November delivery confirms improved demand.
  • Lanworth trimmed its world corn production forecast by 1 MMT, citing lower crop prospects in Brazil.

 

Soybean futures have extended early gains to trade 5 to 10 cents higher with the November contract leading gains.

  • Thoughts that soybean harvest may have or will soon pass the halfway point, easing related hedge pressure is encouraging short-covering in the bean market today.
  • And while there has been no confirmation of such news, there has recently been speculation foreign buyers are taking advantage of the recent price break and the government shutdown to book supplies.
  • Basis at interior locations is mixed today as farmers have been reluctant to sell and supplies are tight.
  • Meanwhile, traders say exporters at the Gulf have not had enough soybeans to meet their export loading commitments this fall as they have faced tough competition from domestic processors. Gulf basis information is unavailable today.
  • While USDA may not release its Weekly Export Sales Report Friday, pre-report expectations are for soybeans sales between 950,000 MT and 1.1 MMT.

 

SRW wheat futures are mostly 3 to 7 cents lower, while HRW is down 4 to 9 cents and HRS is seeing losses of 4 to 7 cents.

  • Wheat futures are giving technical signals that the market's rally has run its course. This is adding selling pressure today.
  • Spillover from corn and gains in the U.S. dollar index add pressure. Dollar strength could also price U.S. wheat out of export business.
  • Also, rains in winter wheat country early this week are seen as primarily beneficial for the recently planted crop, though replanting will be necessary in some areas where rains were excessive.
  • But concerns about another frost/freeze event in the forecast for Argentina as well as acreage concerns in Russia and Ukraine raise questions about the global crop outlook.

 

Live and feeder cattle futures are enjoying slight gains at midday.

  • Live cattle futures are benefiting from short-covering as well as friendly cash cattle prospects this week.
  • Last week, cash trade took place at mostly $128 -- steady to up $2 compared to the week prior.
  • Tighter showlist estimates this week and improved boxed beef action according to private data could give feedlots the upper hand in negotiations, though packers are still dealing with negative margins.
  • The Cattle on Feed Report is unlikely to be released Friday, but the market does have pre-report expectations to factor into prices. On Feed is expected to come in around 92.66% of year-ago levels, while Placements are seen at 101.01% and Marketings at 104.23% of year-ago levels.
  • Softer corn prices and tight supply prospects are lifting feeder cattle futures.

 

Lean hog futures continue to post slight to moderate gains at midday.

  • Attitudes remain bullish in the lean hog market after the market surged again yesterday, despite softening fundamentals. The market is seeing technical followthrough buying today.
  • Traders are still working to narrow the discount the December contract holds to the October contract that expired Monday as updates to the cash hog index were halted by the government shutdown. CME Group today announced the final settlement price for the contract was $90.62.
  • The pork cutout value slipped $1.44 yesterday, according to Urner Barry. But a pullback in the cash hog market has helped packer cutting margins to firm.
  • Today cash hog bids are mostly steady to lower as supplies are on the rise. But tighter supplies in the eastern Corn Belt are causing packers to pull hogs from the western Belt, according to Urner Barry.
  • Strength in the U.S. dollar index is keeping buying enthusiasm in check.
     
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