Market Snapshot, Noon CT (VIP) -- Advice -- March 7, 2014

March 7, 2014 06:08 AM

Corn and soybean producers: Reward the rally with sales… May corn futures have rallied nearly 90 cents from their winter low, while December futures have rallied nearly 60 cents. The trend is definitely higher, but that's too much of a rally to pass up, especially since basis is weakening. Corn producers are advised to make a 10% 2013-crop cash sale. This pushes hedgers to 70% sold on old-crop and cash-only marketers to 60% sold. Corn producers are also advised to sell another 10% of expected 2014-crop production via cash forward contract sale for harvest delivery. This pushes both hedgers and cash-only marketers to 30% forward priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Soybean hedgers and cash-only marketers are also advised to increase new-crop sales to take advantage of the $1-plus rally in November soybean futures. Make a 15% cash forward contract sale for harvest delivery to get to 25% priced on expected 2014-crop production. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Wheat producers: Increase old- and new-crop sales… Wheat futures have rallied stronger and the rally has lasted longer than we anticipated. With futures around $1 off the winter lows, it's time to reward the rally. Cash-only marketers are advised to make a 15% 2013-crop sale to get to 90% sold on old-crop. Hedgers and cash-only marketers are advised to sell 15% of expected 2014-crop production via cash forward contract for harvest delivery to get to 50% priced on new-crop. If your basis is wider than normal, use a hedge-to-arrive contract instead of cash sales.

Corn futures are fractionally to 6 cents lower this morning on profit-taking.

  • Profit-taking and position evening ahead of the weekend has corn futures under pressure.
  • Traders are also factoring in favorable crop growing prospects that usually result under El Nino condition. Yesterday the National Oceanic Administration (NOAA) gave 50% odds for El Nino this summer.
  • The recent runup in prices has triggered farmer selling, resulting in weaker basis at interior points. The sales are contribution to the selling pressure.
  • Today's stronger dollar is also seen as a negative.
  • But gains in the futures markets have spurred farmer sales. This has caused basis at interior locations to soften.
  • Traders are also reducing risk ahead of Monday's USDA Supply & Demand Report, which is expected to show old-crop corn carryover up slightly from last month at 1.487 million bushels.
  • Gulf corn basis is 2 cents higher at midday for March delivery and unchanged for deferred delivery periods.


Soybean futures continue to trade mixed with the March through August contracts up 7 to 10 cents and deferred contracts 2 to 10 cents lower.

  • Soybean futures are seeing some bull spreading this morning after absorbing an early round of profit-taking.
  • Traders are applying bull spreads as they expected planted soybean acres to rise in 2014, while export demand for old-crop beans remains strong.
  • Nearby contracts have hit new contract highs this morning and are finding support at the old contract high on the set back.
  • Traders expect Monday's USDA Supply & Demand Report to show a drawdown of old-crop soybean stocks due to continued strong export demand. The market expects USDA to lower its old-crop carryover estimate 9 million bu. from February to 141 million bushels.
  • While China has reported small sales cancellations, shipping delays in Brazil have kept the nation buying U.S. beans longer than anticipated.
  • Traders continue to lower their expectations of the huge South American crop as more private crop watchers report on the weather impact on this year's crop.
  • Gulf soybean basis is unchanged at midday.


Wheat futures are 5 to 10 cents higher in most contracts across all three flavors.

  • Traders continue to bid prices higher on anticipation of increased U.S. exports due to the ongoing dispute between Ukraine and Russia. While the region is open for business with grain exports coming out of Ukraine ports and not Crimea ports, export sources say recent bookings of wheat from the Black Sea region have declined.
  • Because of the uncertainty traders are covering short positions ahead of the weekend.
  • Traders are also reducing risk exposure ahead of Monday's S&D Report. Pre-report expectations are for USDA to raise its 2013-14 wheat carryover peg from 558 million bu. in February to 567.75 million bushels.
  • May SRW wheat futures have traded above $6.60 and are testing resistance starting just under that price level.
  • Gulf SRW basis activity is providing buying support with bids for April and May delivery up 9 cents and 5 cents, respectively. March and June-August delivery basis is unchanged at midday. Gulf HRW basis is unchanged at midday.


Live and feeder cattle futures are slightly higher.

  • Traders are leaning to the buy side this morning as futures prices are still at a discount to the cash. Cash cattle traded at lower prices of $148 on the Southern Plains and $150 in Nebraska yesterday, above nearby futures prices.
  • Feedlots were obviously disappointed in the lower trade considering impressive gains in the beef market this week as well as tighter showlist estimates.
  • But packer cutting margins continue to be negative and some have reduced slaughter hours to reduce losses. The strategy may be working as the reduced kills and higher wholesale prices have trimmed cutting losses by nearly $64 this week.
  • Choice beef rose $1.30 this morning and Select gained 27 cents. Movement is a slow 49 loads, however, reflecting the reduced kill and possibly slowed demand.
  • Technical traders continue to look at potential topping signals in this heavily overbought market. The April contract marked a key bearish reversal Wednesday. It has not been negated but support seems to appear on each test of the small upside gap area under $142.80.
  • Spillover support is lifting feeder cattle futures.


April through July lean hogs are slightly moderately higher while deferred months are choppy.

  • Cash hog prices are higher again today and PEDV is all the talk. That has summer months rising on expectations of supply cuts.
  • The National Animal Health Laboratory Network reports a total of 252 new cases of PEDV were confirmed in the last reporting period, bringing the grain total to 4,106. While down from the previous week's high, the tally continues to grow.
  • The pork cutout value rose 80 cents this morning but movement has slipped to 134.64 loads.
  • Packers continue to cut in the black, which keeps them aggressive in locking in supplies.
  • The Relative Strength Index signals it is time for a price correction. However, April futures gapped higher at the open, traded lower to fill the gap and have moved up again. That's bullish. The contract high set Wednesday at $114.67 1/2 is resistance.
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