Market Snapshot, Noon CT (VIP) -- Advice -- January 11, 2013

January 11, 2013 06:44 AM
 

LIVESTOCK PRODUCERS: COVER 25% OF 1ST HALF FEED NEEDS

Corn and soybean meal futures have dropped sharply ahead of this morning's USDA reports. While the trend is definitely down, the recent price action gives livestock producers a "value" buying opportunity. Cover 25% of 1st-qtr. corn needs in long March corn futures and 25% of 2nd-qtr. corn needs in long July corn futures. Also cover 25% of 1st-qtr. protein needs in long March soybean meal futures and 25% of 2nd-qtr. protein needs in long July soybean meal futures. If there's a sharp bearish reaction to this morning's reports, costs on the remaining 75% of first half feed needs will be lower.
 

Corn futures immediately reversed early losses upon the release of USDA's January reports, and the market has since built early gains to trade 15 to 20-plus cents higher through the July contract, with deferred months holding near unchanged.

  • Traders are giving USDA's reports a friendly read, focusing on the fact that USDA trimmed 2012-13 carryover by 45 million bu. to 602 million bu., whereas traders had expected USDA to raise carryover by 20 million bushels.
  • Increases to corn feed & residual use of 300 million bu. from December more than offset a 200-million-bu. cut to old-crop corn exports.
  • Also supportive, USDA pegged grain stocks as of Dec. 1 at 8.03 billion bu., which was 207 million bu. below the average pre-report trade guess.
  • USDA also trimmed global corn carryover by 1.62 MMT to 115.99 MMT.
  • The only negative: USDA raised its annual production estimate by 55 million bu. from November, whereas traders had expected it to be lower.

 

Soybean futures initially had a negative reaction to USDA's report data, but then pared losses. Futures are currently 11 to 19 cents lower in the March 2013 through the March 2014 contracts.

  • There were no major surprises in today's reports for the soybean market. USDA raised the bean crop estimate slightly more than expected to 3.015 billion bu., whereas traders had expected a final production estimate of 22.999 billion bu.
  • USDA's carryover peg of 135 million bu. matched the pre-report trade guess.
  • Dec. 1 stocks were actually slightly below the average, pre-report trade guess at 1.966 billion bu., which is well below last year's 2.370 billion bu. at that time.
  • USDA also trimmed its global carryover projection to 59.46 MMT compared to 59.93 MMT in December.
  • This morning, USDA announced another daily soybean sales to China for 120,000 MT of beans for 2012-13 delivery.

 

Wheat futures have rallied to post gains in the teens to 20s, with Chicago leading to the upside.

  • Most components of the January USDA report data favored market bulls.
  • Wheat futures benefited from USDA's smaller-than-expected 2012-13 carryover estimate of 716 million bu. and its lower-than-anticipated winter wheat seedings estimate of 41.82 million acres. This was 27 million bu. lower than expected on carryover and 780,000 less than expected for winter wheat seedings.
  • USDA's Dec. 1 wheat stocks estimates also came in below expectations at 1.66 billion bushels.
  • Its global carryover estimate also favored market bulls as USDA trimmed its projection by 310,000 MT from December.

 

Live cattle futures are little changed from early trade, with the February contract moderately lower and deferred months seeing slight losses. Feeder cattle futures have softened to trade moderately lower.

  • A few more cash cattle sales took place today in Texas and Oklahoma around $126 today, which is steady with trade at these levels yesterday but down $2 from the bulk of trade last week. This is putting light pressure on futures.
  • Negative packer profit margins, unimpressive boxed beef action and heavier showlist estimates gave packers the advantage in cash negotiations.
  • This morning, Choice boxed beef prices firmed 41 cents while Select cuts slid 15 cents. Movement slowed to 89 cents.
  • The tighter supply picture USDA painted today is weighing on feeder cattle futures as it points to higher feed costs.

 

Lean hog futures are narrowly mixed at midday.

  • Price action has stayed light following this morning's USDA crop reports. But buying interest in hogs have backed off slightly.
  • Cash hog bids are steady to weaker as packers are generally well supplied and they are dealing with negative cutting margins.
  •  
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