Market Snapshot, Noon CT (Advice) -- April 4, 2014

April 4, 2014 07:09 AM

Fed cattle producers: Exit 1st-qtr. hedges… With the first quarter complete, we advise fed cattle producers to lift the portion of hedges in April live cattle futures covering 1st-qtr. marketings. Maintain coverage in that contract for 50% of 2nd-qtr. marketings for now. Also, the April $136 put options held against 1st- and 2nd-qtr. marketings will expire worthless today. Bottom line: Get out of all 1st-qtr. coverage, but maintain the futures coverage for 50% of 2nd-qtr. marketings.

Corn futures continue to trade fractionally to 2 cents weaker with May futures leading the decline. However, futures have trimmed earlier losses.

  • Profit-taking continues as the main feature as traders even positions ahead of the weekend.
  • Adding to the pressure is strength in the U.S. dollar index.
  • Traders view news China is still evaluating Syngenta's Viptera corn trait (MIR 162) as negative, as Reuter's reports an industry source that does not expect approval until the second half of the year. However, the negative reaction is muted as traders are not surprise by the news as they believe China is using the trait to manage import totals..
  • Traders are keying on how May futures handle the $5.00 mark, which has acted as both support and resistance in recent sessions. Futures are trading slightly under the mark in late-morning trade.
  • New-crop futures are slightly weaker on ideas Midwest weather will improve late next week which could trigger the start of planting season.
  • Basis levels are reportedly flat at interior locations on light farmer selling. CIF Gulf barge rates are also cited as steady.

Nearby soybeans are slightly lower and new-crop futures are steady to firmer amid bull spread unwinding.

  • Mild profit-taking and unwinding of bull spreads in pre-weekend position evening have erased early gains this morning. The front-month contracts are trading near their daily lows.
  • Mild strength in the U.S. dollar index is adding to the negative tone.
  • Traders are focused on November soybeans which are currently trading above the $12.00 level. Whether it finishes the week above or below that mark could be telling of near-term price direction.
  • In addition, some technical traders note a bull pennant could be forming in the May contract if today's low holds.
  • Old-crop contracts continue to find support from strong export demand for U.S. beans that has lasted longer than anticipated. This has many expecting USDA to raise its 2013-14 export forecast in next week's Supply & Demand Report.
  • Basis levels at interior points remain flat on slow farmer selling.

Wheat futures continue to slump on technical selling with SRW and HRS down 6 to 11 cents and HRW futures down as much as 13 cents.

  • Technical selling in wheat futures has increased on the penetration of the steep winter uptrend, key moving averages and support at the late-November high.
  • Traders do not anticipate any surprising news in the start of USDA's weekly crop condition updates Monday as state updates have kept traders current on crop deterioration.
  • Plus, improved rain forecasts going forward and recent precip are expected to help the crop. The market is not concerned about a freeze event in Texas overnight.
  • Pressure on the corn market and strength in the U.S. dollar index are also adding to the today's negative tone.

Live cattle futures are sharply lower in most contracts. Feeder cattle futures are seeing moderate to heavy losses.

  • Cattle futures are sharply lower on steep losses in the wholesale trade along with expectations of lower cash cattle trade.
  • Hefty losses in lean hog futures and a stronger U.S. dollar index are also contributing to the declines in cattle futures.
  • Pre-weekend position evening and ideas lean hog futures have topped are also behind selling.
  • Sharply lower wholesale boxed beef prices are pressuring futures this morning. Choice boxed beef is $2.78 lower and Select is down $2.96. Movement is a solid 109 loads, however.
  • Today's selloff has April live cattle trading at nearly a $9 discount to last week's $152 trade in the Southern Plains. Meanwhile trade reports indicate feedlots continue to say "no" to bids of $147.
  • Feeder cattle futures are lower on the drop in cattle futures and spillover selling from lean hogs.

Lean hog futures are sharply lower with several contracts down the daily $3.00 limit.

  • Ideas lean hog futures have posted a top along with sharp losses in wholesale pork prices has lead hog futures sharply lower.
  • This morning's pork cutout value dropped another $2.38 following yesterday's $3.42 dive. Movement is lackluster, to, at 118.6 loads.
  • The decline in wholesale pork has pushed packer margins in the red, which limits their buying interest.
  • Some plants had already cut hours to account for tight supplies due to the porcine epidemic diarrhea virus (PEDV). This along with the negative packer margins has traders believing cash prices are headed lower.
  • Adding pressure are reports China will temporarily restrict U.S. pig imports due to concerns about PEDV until the nations agree on a testing protocol.
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