Market Snapshot, Noon CT (VIP) -- Advice -- February 20, 2013

February 20, 2013 06:03 AM
 

LIVESTOCK PRODUCERS: TAKE PROFITS ON 1ST-QTR. FEED COVERAGE...
Livestock producers are advised to take profits on the 25% 1st-qtr. feed coverage in March corn and March soybean meal futures. With March corn and soybean meal futures entering the delivery process next Monday, it's time to exit the 1st-qtr. coverage. Livestock producers should maintain the 25% 2nd-qtr. coverage in long July corn and soybean meal futures for now.

 

Corn futures are mostly 1 to 3 cents higher at midday.

  • Spillover from sharp gains in the soybean market are encouraging short-covering in the corn pit.
  • But a shift to a wetter weather pattern for the western Corn Belt along with dollar strength is limiting buying to short-covering.
  • Additionally, there are no rumored corn purchases, even though corn is hovering around levels that have spurred some scattered demand in the past.
  • Basis around the country remains historically high thanks to very tight domestic supplies. This is also helping to limit price pressure today.

 

Soybean futures are posting double-digit gains after earlier paring the price advance.

  • Soybeans are benefiting from followthrough from yesterday's gains, which is raising expectations of near-term lows being posted.
  • Concerns about yield reductions in Argentina and the possibility of shipping delays in Brazil are supportive factors, as this would extend the window of opportunity for U.S. soybean exports.
  • But once the South American shipping season begins, it could have a long tail given record production.
  • March soybean futures are trading near session highs, but face tough resistance at $15.00. In recent weeks, this level has limited the contract's upside.

 

Wheat futures are favoring a mostly firmer tone at all three exchanges.

  • Wheat futures are benefiting from signs of demand improvement. On top of news China has recently booked about 350,000 MT of U.S. wheat, Egypt purchased 60,000 MT of U.S. SRW wheat from its overnight tender.
  • The Chinese and Egyptian purchases signal U.S. wheat may finally be attracting some export demand.
  • Texas state statisticians report 49% of the winter wheat crop is rated "poor" to "very poor" as of Feb. 17, which compares to 40% in these categories in late-November.
  • But significant precip in the near-term forecast for the Southern and Central Plains makes it difficult for the wheat market to find buyers.

 

Live cattle futures have softened to post sharp losses in all but the August contract, which is just slightly lower. Feeder cattle futures are at or near their $3.00 limit lower.

  • Early pressure on cattle futures triggered a round of aggressive sell stops to sharply extend losses.
  • Nearby live cattle futures are still at a premium to last week's $123 cash cattle trade.
  • Traders are also beginning to prepare for Friday's Cattle on Feed Report, which is expected to show On Feed at 93.8%, Placements at 100.3% and Marketings in 104.7% of year-ago levels.
  • Traders are disregarding signs of improvement in the boxed beef market. This morning, Choice cuts rose 44 cents and Select cuts fell 4 cents. Movement was again notably strong at 143 loads.
  • Feeder cattle futures took out near-term levels of support today, accelerating selling. March feeders are at around an 80-cent discount to the cash index. Improvement in the corn market is adding to the weaker tone.

 

Nearby lean hog futures are moderately lower and deferred months are narrowly mixed.

  • Steady to as much as $3 lower cash hog bids today are weighing on nearby futures.
  • But deferred months are benefiting from yesterday's $1.48 surge in the pork cutout value with strong movement. This helped improve packer margins.
  • Considering the product market's struggle to put in consecutive days of gains, traders are hesitant to add long positions.
  • Buying enthusiasm is also being curbed by talk China may follow Russia in requiring imports of U.S. pork to be accompanied by certification it contains no ractopamine residue starting March 1.
  • Also, a number of packers have pulled orders ahead for reduced slaughter runs in anticipation of the winter storm event expected to hit the western Corn Belt tomorrow.
     
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