Market Snapshot, Noon CT -- July 27, 2012

July 27, 2012 06:49 AM
 

Corn futures have trimmed gains slightly, but most contracts continue to post double-digit gains.

  • Crop concerns are back in focus today as rains are too late to benefit the crop and heat is expected to cause further yield deterioration next week.
  • Informa Economics reportedly reduced its harvested acreage projection by 2 million and and its yield projection to 134 bu. per acre, to result in a 11.5-billion-bu. crop projection.
  • Outside markets are also supportive this morning thanks to better than expected U.S. second quarter GDP data, though 1.5% growth still reflects a sluggish economic recovery.
  • Buying interest is being restrained by continued talk that feed users will import corn and yesterday's net export sales reduction shows demand destruction has occurred.

 

Soybean futures have scaled back gains slightly. Most contracts are posting gains in the 25- to 35-cent range.

  • Recent and upcoming rains are not seen as widespread or heavy enough to have a significant, positive impact on the crop, which is in its key development stage. Plus, some forecasters have turned drier for next week's outlook.
  • As a result, private crop watchers continue to lower their estimates. Today, Informa Economics trimmed its harvested acreage projection and cut 1.5 Bu off its average yield projection to 38.5 Bu per acre to result in a total production tally of 2.9 billion bushels.
  • International Grains Council slashed its US soybean production estimate to 79 million metric tons (MMT) -- a 5-year low -- and its export forecast to 35.5 MMT.

 

Wheat futures have softened a touch to post gains in the teens to 20s.

  • Strong gains in the corn and soybean market along with a softer dollar has allowed wheat traders to shift their attention to production concerns overseas.
  • Russia's national weather center cut its grain crop forecast by 6 million metric tons (MMT) on both ends of the range to 77 MMT to 80 MMT today.
  • International Grains Council also sliced its Russian production forecast by 8.2% to 45 MMT and its export forecast by 9 MMT, which compares to 22 MMT the year prior.
  • Scouts on the Wheat Quality Council HRS tour found above-average yield potential along with high quality. Demand for the high-quality US spring wheat crop should be strong.

 

Live cattle futures have surged sharply higher, with nearby contracts leading the charge. Feeder cattle are also sharply higher in all but far-deferred contracts.

  • Light cash cattle trade took place at firmer prices yesterday, but these $114 cash sales are well below futures prices.
  • But traders are more focused on recent signs the boxed beef market is working on a low and expectations for supplies to tighten through the end of the year.
  • This morning, however, boxed beef prices fell $1.08 for Choice and $1.01 for Select, though movement was solid at 114 loads.
  • Nearby feeder cattle futures are enjoying some short-covering on ideas the market is oversold and spillover support from cattle. Plus, the fact corn may post its first lower weekly close since mid-June has inspired optimism a high is in or near.
  • Outside markets are also supportive as the dollar is under pressure and the stock market is enjoying strong gains.

 

Lean hog futures have extended early gains to trade moderately to sharply higher in most contracts. The exception is slight losses in the August contract.

  • Lean hog futures are benefiting from recent improvement in the pork market which has in turn boosted packer profit margins. Some packers are now cutting in the black, which the market expects to translate to cash market strength as supplies are expected to tighten due to extreme heat and lofty feed costs.
  • However, the break in the heat has led to a near-term increase in market-ready supplies. Thus, cash hog bids are mostly steady today.
  • Traders expect pork movement to reflect improved demand.
  • Improved risk appetite across the investment world is also supportive.
     
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