Market Snapshot, Noon CT -- July 19, 2012

July 19, 2012 07:02 AM
 

 

Corn futures have seen volatile price action today. Currently futures are fractionally to around 5 cents higher through the May 2013 contract; deferred months are weaker.

  • Traders have oscillated between booking profits and buying futures on hopes the market may again move up to or past record-high levels hit earlier today.
  • Adding to ideas the market could continue to move higher is the intense drought across the Corn Belt and a forecast for high temps and below-normal rainfall.
  • Encouraging profit-taking is this morning's disappointing weekly corn export sales of 180,700 metric tons (MT), which signals some demand destruction has occurred. Also, weekly ethanol production data from the EIA was the lowest since it began releasing the reports in June 2010.

 

Soybean futures are 20- to 40-plus cents higher through the January contract. Deferred months are lower.

  • Soybean futures continue to benefit from production concerns as the National Weather Service forecast points to continued heat and dryness during the key pod-filling stage.
  • Plus, recent precip has not been as widespread or heavy as hoped.
  • Signs that lofty prices have slowed export demand have encouraged bouts of profit-taking at times today, though bulls remain in control.
  • Weekly soybean export sales fell short of expectations, but this was largely offset by news of a 112,000 MT daily sale to the United Kingdom for 2012-13.

 

Nearby wheat futures continue to enjoy gains in the teens to 20s at all locations.

  • Spillover support from soybeans and overall strength in corn prices, along with positive outside market are making it easy for wheat to rally today.
  • Plus, the front-month Chicago wheat contracts looks like a value buy as -- unlike nearby corn and soybean futures -- it is still several bucks below its all-time high on the weekly continuation chart.
  • Weekly wheat export sales of 589,200 MT for 2012-13 topped expectations.
  • Production concerns overseas continue to boost U.S. wheat export prospects.
  • This morning's drought monitor and the National Weather Service extended forecasts raise concern the U.S. winter wheat crop will again be planted into dry soils.

 

Live cattle have improved to post slight to moderate gains through the February contract, deferred months are mixed. Feeders have firmed to moderately higher trade.

  • Traders are engaging in some short-covering on a weaker dollar and signs the boxed beef market may be working on a near-term low.
  • Boxed beef prices softened $1.13 for Choice cuts and 53 cents for Select this morning, but movement was strong at 120 loads.
  • Traders are also readying for USDA's Cattle Inventory and Cattle on Feed Reports tomorrow. Traders expect them to show herd contraction and a slowdown in Placements, which is supportive of futures.
  • A pullback in corn prices has encouraged short-covering in feeder cattle futures.

 

August lean hogs are sharply higher thanks to their discount to the cash hog index. Deferred contracts are slightly to moderately higher.

  • Lean hog futures are benefiting from ideas the product market may have put in a low, as pork cutout values have recently improved along with movement.
  • However, packer profit margins have again slipped as some packers have had to pay steady to higher prices for tightening supplies as a result of recent heat.
  • Recent strength in the grain markets have traders scaling back their farrowing expectations, which tightens supply expectations for late this year into 2013.
  • But countering this are expectations for continued frozen pork stocks. Pre-report expectations for tomorrow's Cold Storage Report are for record-high frozen pork stocks for the month of June.
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