Market Snapshot, Noon CT -- (VIP) -- March 20, 2014

March 20, 2014 06:58 AM
 

Corn futures are 6 to 7 cents lower at midday.

  • Profit-taking is weighing on the corn market today. A retreat in soybean and wheat prices is adding to the negative tone.
  • While tensions in the Black Sea region are limiting selling interest in the corn market, traders remain unwilling to push old-crop corn prices above $5.00.
  • Weekly corn export sales of 745,800 MT for 2013-14 topped expectations and rose 20% from the prior four-week average. Exports of 927,100 MT were also impressive. But traders see strong demand as factored into prices.
  • News Japan's use of corn in feed rations rose to 45.7% in January compared to 42.2% the previous year is also supportive as it confirms corn prices have become more competitive.
  • Adding pressure, Gulf basis slid 6 cents for immediate delivery ahead of midday after dropping 4 cents this morning.
  • Strategie Grains raised its EU corn production forecast for 2014-15 by 100,000 MT to 65.2 MMT.

Old-crop soybean futures are 1 to 9 cents lower, while new-crop beans are 5 to 7 cents lower.

  • Traders are focused on taking advantage of recent strong gains by booking some profits today. Strength in the U.S. dollar index is also supportive to that end.
  • So far, the July contract has respected support at $14.00.
  • Confirmation of strong demand via this morning's Weekly Export Sales Report initially supported the market, but this has since faded as strong demand is known.
  • Soybean sales of 202,200 MT for 2013-14 and 437,500 MT for 2014-15 topped expectations by a wide margins. Plus, the tally included no major order cancellations by China. Exports of more than 1.119 were also impressive with China as the lead recipient.
  • Total soymeal sales of 486,900 MT (near evenly split between marketing years) were also strong and more than double the top end of expectations.
  • Traders are also brushing off USDA's announcement China made a daily purchase of 120,000 MT of new-crop soybeans.
  • Reports China is reselling it South American soybean buys to the U.S. is adding to the negative tone as their is some concern about slowed demand from the nation.
  • Gulf basis is steady to a penny higher at midday.

Wheat futures have softened notably to trade 13 to 16 cents lower in the SRW market while HRW and HRS wheat are roughly 8 to 11 cents lower.

  • Traders took advantage of the recent runup in wheat futures and gains this morning by booking profits. The SRW market has found some support at $7.00, however.
  • Traders are also removing some of the fear premium traders built in amid ideas unrest in Ukraine would eventually shift some grain export business to the U.S. There is still much uncertainty about just how much of an effect this will have on trade.
  • While weekly wheat export sales of 401,800 MT for 2013-14 and 195,200 MT for 2014-15 topped expectations, the tally was not overly impressive.
  • Meanwhile, drought remains a concern in winter wheat country, but for now traders feel prices have risen enough to reflect crop damage.
  • The three-month temperature outlook is unfavorable for drought relief.
  • Pressure also stems from news Japan's ag ministry sees 2014-15 feed wheat imports at 900,000 MMT, down from 1.07 MMT in 2013-14 due to corn becoming more competitive. This is not surprising.

Nearby live cattle futures have turned moderately lower while October and December live cattle are now slightly higher.

  • Bull spread unwinding is pressuring nearby cattle futures. Early gains in these contracts also triggered some profit-taking.
  • Traders have shown limited interest this week in aligning the front-month with April live cattle, signaling traders remain convinced a top is near.
  • Meanwhile, the market is brushing off reports of light cash cattle trade in Kansas at $150, up $2 from the bulk of trade last week in the state.
  • Boxed beef prices are hovering near record levels and showlists are tighter this week.
  • However, traders are focused on some indications the beef market may have put in a top. Choice boxed beef values slid $1.10 and Select fell 52 cents this morning, but movement picked up to 86 cents.
  • Tomorrow's Cattle on Feed Report is expected to remind of tight supplies, with On Feed expected to come in at 98.9% of year-ago levels and marketings at 97.0% of year-ago. Placements will be the wild card as expectations span a 16-point spread, with the average standing at 109.7% of year-ago.
  • Feeder cattle futures are also facing profit-taking pressure.

Lean hogs remain very choppy. The front-month is sharply higher, May through July futures are slightly to sharply lower, and far deferred months are posting slight to sharp gains.

  • April lean hogs are again posting new contract highs, keeping bulls in control of the market.
  • This contract is also benefiting from the ongoing surge in the cash market; packers are said to be stockpiling in anticipation of shortages in the months ahead due to the porcine epidemic diarrhea virus (PEDV).
  • The cash hog index has surged to $118.46, $7 below the front-month.
  • But the rest of the market is seeing bull spread unwinding action as traders work to correct the oversold conditions of nearby contracts.
  • Traders are discouraged by lackluster weekly pork exports of 5,200 MT for 2014, which were a marketing-year low.
  • Also, the pork cutout value fell 57 cents this morning. Movement failed to impress at 137.13 loads.
  • Spillover from the live cattle market is also keeping spring and summer months under pressure.
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