Market Snapshot, Noon CT -- (VIP) -- March 12, 2014

March 12, 2014 06:58 AM


Corn futures have extended early gains to trade 2 to 6 cents higher with the front-month leading to the upside.

  • Gains in the corn market are impressive considering heavy losses in soybean futures.
  • The surge in wheat futures this morning returned some buying interest to the corn market.
  • In addition, Brazil's Conab has trimmed its corn crop estimate by 290,000 MT to 75.18 MMT today, reminding of late-season growing season problems.
  • Support also stems from ideas the U.S. wheat market may benefit from ongoing unrest in Ukraine as importers have displayed some hesitation when it comes to booking needs from the country.
  • Traders are brushing off news ethanol production declined 25,000 barrels per day (bpd) to 869,000 bpd the week ended March 7, the lowest level of the year. Ethanol stocks fell 703,000 barrels to 15.91 million barrels.
  • Gulf corn basis firmed 2 cents for May delivery and 4 cents for August shipment at midday, while other months held steady. This reminds of strong demand for U.S. corn.

Soybean futures remain under pressure with old-crop futures 20- to 30-plus cents lower and new-crop posting losses around 12 to 15 cents.

  • Rumors that China has canceled some of its Brazil bean buys and speculation that some of the shipments may be diverted to the U.S. is a major source of pressure today.
  • The market's reaction to such talk pushed nearby contracts through key support at $14.00, triggering sell stops on the way down.
  • The front-month has found some support around the September high of $13.77 3/4. The next support level for May soybeans likely stands around $13.49. Today's big downside break likely signals a near-term top is in place.
  • The market is also being pressured by spread unwinding. In addition to unwinding of bull spreads in soybeans, traders are also unwinding long soybean/short corn spreads.
  • Traders are brushing off news Brazil's Conab slashed its forecast for the 2013-14 soybean crop by 5% to 85.44 MMT, as poor weather at the end of the growing season was known.

Wheat futures remain the upside leader today, with SRW 16 to 21 cents higher, HRW up 12 to 16 cents and HRS wheat 9 to 16 cents higher.

  • U.S. crop concerns, unrest in Ukraine and money flowing out of beans are lifting wheat today. Early gains triggered buy stops.
  • While global grain traders say French wheat is likely to replace Black Sea wheat if tensions slow shipments in the region, there is some optimism the U.S. stands to benefit, too.
  • Meanwhile, the Southern Plains is still dealing with drought as the winter wheat crop starts exiting dormancy. There is also some talk that spring wheat acreage could decline this year.
  • Traders are discounting news that Russia's Agriculture Minister has raised his forecast for the country's 2013-14 grain exports by 2 MMT to 22 MMT.
  • FranceAgriMer raised its 2013-14 French wheat ending stocks forecast by 350,000 MT to 3.2 MMT due to lower exports.
  • Also providing support, May SRW wheat futures surged through the 200-day moving average today for the first time since early 2013.

Live cattle futures have improved a touch to trade steady to slightly higher. Feeder cattle futures are slightly higher as well.

  • Fundamentals point to at least steady cash cattle prices relative to last week's $148 to $150 action. The front-month is around $4 below the low end of that range.
  • Informing such opinions are tighter showlist estimates and the surge to record-highs in the boxed beef market.
  • This morning, Choice cuts firmed 44 cents and Select slipped 4 cents. But the more moderate price gains did spur improved movement of 84 loads.
  • In addition, packer profit margins have moved into the black, which traders believe improves demand for cash supplies.
  • This week's kill is down roughly 3.9% from year-ago levels, keeping tight supplies in focus.
  • Spillover from live cattle and a bullish chart posture are lifting feeder cattle futures.

Lean hogs futures are weaker in all but the June contract, which is slightly higher.

  • While lean hogs opened under pressure, the early pullback has spurred some bargain buying at times, as there is much uncertainty regarding near-term and longer-term price direction. However, traders remain largely focused on profit-taking.
  • Traders are also uneasy about how soon the futures market will put in a top as the market remains overbought according to the relative strength index.
  • The impact of the porcine epidemic diarrhea virus (PEDV) remains a major source of concern.
  • Also, with beef prices at record highs, pork is still a relative value. This has kept the product market pointed higher and movement decent.
  • The pork cutout value surged $2.11 this morning to a new record of $118.57 per cwt., as all cuts except bellies posted strong gains. Also, movement was solid at 204.24 loads.
  • Cash hog bids are higher again today as packers are facing winter weather disruptions in some areas of the Corn Belt. Plus, strong packer profit margins keep demand high.
  • Average hog weights in Iowa and southern Minnesota ticked up 0.3 lb. to 282.1 lbs. the week ended March 8, but head counts declined by 5,000 from week ago to 392,000 head. This compares to head counts of 420,000 last year, reminding of PEDV.
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