Market Snapshot, Noon CT (Advice) -- April 23, 2014

April 23, 2014 07:02 AM

Cotton producers: Increase new-crop sales… December cotton futures extended their rally from the winter lows, but we are concerned the contract may be running out of steam on this leg up. Hedgers and cash-only marketers are advised to sell 25% of expected 2014-crop production via forward contract for harvest delivery to get to 50% forward priced on new-crop.

Fed cattle producers: Exit 2nd-qtr. hedges… Expiration of April live cattle futures is just a week away. As a result, it's time for fed cattle producers to exit the 50% 2nd-qtr. coverage in this contract. We are willing to carry all risk in the cash market for now, but be prepared to add hedge coverage if futures challenge the winter highs.


Corn futures are 3 to 7 cents higher with the May 2014 through July 2015 contracts up 6 to 7 cents.

  • Corn futures are firmer as traders view current weather forecasts as unfavorable for active corn planting progress. Cool temperatures along with showers and rains will prevail across much of the Corn Belt with heavy rains expected later this week.
  • The NWS 6- to 10-day outlook also calls for below-normal temps, which would also be unfavorable for timely planting.
  • A weaker U.S. dollar index is also some light support.
  • Traders continue to view the $5.00 level as critical. Current activity has the May through September 2015 contracts all trading back above this level.
  • News China bought 120,000 MT of U.S. sorghum for 2013-14, which traders suspect replaces some of the rejected U.S. corn shipments, also provided light support in early trading.
  • Ethanol production for the week ended April 18 fell 29,000 barrels per day (bpd) to 910,000 bpd. Ethanol stocks rose 566,000 barrels to 16.52 million barrels.
  • Interior basis bids are steady to higher and Gulf basis bids are firm.

Soybean futures continue to post two-sided trade this morning with the May and July contracts down 1 to 2 cents and the August and later contracts 3 to 7 cents higher.

  • Bull spread unwinding is the key feature today as traders adjust positions as a result of the surprising and sharp increase in daily trading limits announced late yesterday.
  • This is lifting new-crop beans and pressuring old-crop contracts.
  • Nearby futures are seeing some pressure from news the Chinese preliminary purchasing managers' index (PMI) points to ongoing contraction in the nation's manufacturing sector. However, the PMI did improve over month-ago.
  • The U.S. ag attaché in Argentina estimates 2014-15 soybean plantings will rise to 20.6 million hectares from the current year, up 1.5%, with soybean production estimated at 57.5 MMT.
  • Interior soybean basis bids are listed as firm and Gulf basis levels are called mixed.

SRW wheat futures have turned positive on technical buying with both the HRW and SRW wheat futures up 2 to 4 cents and the HRS wheat contracts up 5 to 7 cents.

  • Wheat futures have turned higher on technical buying.
  • The lead-month May SRW wheat contract has moved above the 14-day moving average, prompting chart-based buying.
  • Even thought there is rain in the near-term forecast for the Plains, the NWS 6- to 10-day forecast calls for below-normal precip across the HRW Wheat Belt, which suggests more crop stress is ahead.
  • Forecasts calling for cold, wet conditions to continue across the Northern Plains has traders pricing in some weather premium for HRS wheat futures.
  • News China sold just 7.2% of wheat up for auction in its weekly offering of state reserves is helping to limit selling. This is down notably from 16.87% last week.
  • The weaker U.S. dollar index is seen as supportive.
  • Gulf wheat bids are steady.

Live cattle futures are mixed while feeder cattle futures are slightly higher.

  • Cattle futures are choppy as traders wait for cash cattle trade to begin.
  • The boxed beef trade continues to provide supportive news. This morning's market saw Choice boxed beef rise $1.14 and Select increase $1.28. Movement is a more positive 92 loads.
  • Packer cutout margins remain in the red but have been trimmed by nearly $100 per head since a week ago to losses of around $25 per head.
  • Yesterday's Cold Storage Report showed frozen beef stocks at the end of March of 404.754 million lbs., around 3.2 million lbs. above the average pre-report guess.
  • Traders are also beginning to ready for Friday's Cattle on Feed Report. They expect On Feed and Placements to come in at 100.2% and 100.8% of year-ago levels, respectively, while Marketings are expected to come in around 96.4% of year-ago.
  • Feeder cattle futures are slightly higher in the face of the mixed live cattle market. Deferred contracts are leading gains.

Summer-month lean hog futures are posting strong gains, with slight gains in far-deferred contracts.

  • Lean hog futures are gaining support from yesterday's friendly Cold Storage Report and positive news on wholesale pork movement..
  • Yesterday's Cold Storage Report showed frozen pork stocks at the end of March at 575.223 million lbs. -- 54.6 million lbs. below pre-report expectations and 79.5 million lbs. below the month prior.
  • Traders are brushing off a $2.40 plunge in the pork cutout value yesterday as the cold storage data indicates supplies are tighter than thought.
  • Pork movement today improved to 283.87 loads this morning and the pork cutout value rose 94 cents today, boosting futures prices.
  • Cash hog bids are mostly steady today.
  • Average hog weights in Iowa/southern Minnesota for the week ended last April 19 hit yet another record high of 286.4 lbs., up 0.7 lbs. from week-ago and 9.3 lbs. above last year.
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