Market Snapshot, Noon CT -- July 26, 2012

July 26, 2012 07:10 AM
 

Corn futures are mixed with a slight downside bias.

  • Traders have shifted more attention to the demand side of the equation -- specifically net export sales reductions for the 2011-12 and 2012-13 marketing years totaling 140,400 metric tons (MT), which signal high prices have reduced demand.
  • Also, rain overnight and today and a wetter near-term forecast makes it difficult for corn to find buyers, despite the fact precip is likely too late to do much good.
  • Basis levels at interior locations have softened, signaling high prices have encouraged farmers to move grain at the same time export demand is easing.
  • But the downside is being limited by news the International Grains Council cut its world corn production forecast for 2012-13 by 53 million metric tons (MMT) to 864 MMT. Most (50 MMT) of this reduction comes from a smaller U.S. corn crop forecast.

 

Soybean futures continue to post double-digit losses across the board.

  • With soybeans currently flowering and setting and filling pods, rains today and more expected this week are timely, encouraging traders to remove some weather premium.
  • Also pressuring futures is the International Grain Council's expectation for world soybean production to rebound by 9% in 2012-13, thanks to improved South American output.
  • But the market's downside is also being limited by signs significant demand rationing has not yet occurred. Weekly export soybean sales were stronger than anticipated at 193,200 MT for 2011-12 and 517,300 MT for 2012-13. Soymeal sales also impressed.

 

Chicago and Kansas City wheat futures are slightly to moderately lower in nearby contracts while deferred months are mostly firmer. Minneapolis wheat is moderately lower across the board.

  • Wheat futures are seeing profit-taking after strong gains yesterday. The market lacks the spillover support from corn it requires to rally today.
  • Disappointing weekly wheat export sales of 367,000 metric tons (MT) for 2012-13 are adding pressure.
  • But downside risk is being limited by news International Grains Council slashed its Russian production estimate for 2012-13 by 6 million MT (MMT) and it now projects total world grain stocks at 337 MMT, down 29 MMT from year-ago.
  • The Wheat Quality Council HRS tour is finding yield potential above year-ago in North Dakota so far this week, which is weighing on Minneapolis wheat futures.

 

Live cattle futures have seen choppy trade this morning and are currently favoring the upside. Feeder cattle futures are enjoying slight gains.

  • Cash cattle activity has yet to get underway, but expectations are for it to take place at prices above last week's $113 trade. Futures have softened at times today as traders worked to narrow the wide premium nearby futures hold to the cash market.
  • Another decline in weekly beef export sales this morning is adding light pressure as it raises global demand questions.
  • Boxed beef movement has improved this week amid choppy prices and this morning was no exception. Choice values firmed 30 cents, while Select cuts slipped 2 cents. Morning movement totaled 106 loads.
  • Feeder cattle futures are benefiting from corrective short-covering as mostly lower corn prices have traders watching for a top. Traders will need proof of this, however, before they will actively add long positions.

 

Lean hog futures have extended early gains to trade moderately higher in most contracts.

  • The combination of recent steady to lower cash hog bids and firmer pork product prices has pulled some packer profit margins into the black. If maintained, this should support the cash hog market.
  • But today cash hog bids are steady to lower as high feed costs and a break in the heat has led to increased hog sales by producers.
  • Also, the pork market continues to improve both in terms of price and movement.
  • Gains in the stock market and sharp losses in the dollar are also supportive.
     
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