Market Snapshot, Noon CT (VIP) -- Advice -- May 21, 2013

May 21, 2013 07:08 AM
 

SOYBEAN CASH-ONLY MARKETERS: TRIM OLD-CROP INVENTORIES...

July soybean futures have moved into the upper end of the extended, choppy trading range, an area that has repeatedly turned back rally attempts since last fall. Combined with very strong basis, this is all the incentive we need to trim old-crop inventories. Cash-only marketers are advised make a 15% 2012-crop sale to get to 90% sold on old-crop.

We are willing to hang on to the final 10% of old-crop bushels as gambling stocks for now, but be prepared to finish sales if July futures signal a move back into the lower end of the range.

 

Corn futures are down 11 to 13 cents in old-crop contracts, while new-crop contracts are mostly 3 to 4 cents lower.

  • The record surge in the nation's corn planting pace has traders reacting negatively as delayed planting concerns are reduced.
  • USDA's progress update yesterday showed a record-large acreage surge in planting last week to 71% complete. The 43-percentage-point rise tied the all-time record surge in terms of percentage gains and the pace is now just 8 points behind the average pace.
  • The sharp pickup in planting progress reduces trader concerns with tight old-crop supplies and resulted in an unwinding of bull spreads.
  • While development continues to lag the norm by a wide margin, traders believe rain makes grains and are negative as a result.
  • Little planting progress is expected this week as the Upper Midwest has seen multiple rain events over the past five days. Plus, the NWS 6- to 10-day outlook calls for above-normal precip for this area.
  • Gulf basis is unchanged at midday.

 

Soybean futures are 8 cents higher in the front-month, while deferred contracts have improved to mixed trade.

  • Tight old-crop supplies continue to support July futures relative to the new-crop contracts.
  • There continues to be some concern over news Argentine port workers at Rosario went on strike Monday due to wages. It's uncertain how long this work stoppage will last, but they are typically short-lived.
  • New-crop futures are seeing selling pressure from the strong gains in corn plantings reported by USDA, which means farmers will soon shift to soybean plantings.
  • While the Midwest has been soaked with rain and more is in the forecast, traders see this as a positive for soybean production once the seed is in the ground.
  • Gulf soybean basis is unchanged at midday.

 

Wheat futures are roughly 8 to 9 cents lower in Chicago, 5 to 7 cents lower in Kansas City, while Minneapolis wheat is now mixed with a downside bias.

  • Wheat futures are lower on spillover selling pressure from corn futures and negative outside markets.
  • Traders cite recent and expected precip for U.S. HRW wheat country and recent rain in areas of Russia and Ukraine as negative.
  • Russia's Grain Union raised the upper end of its 2013 grain harvest forecast to now stand at 90 MMT to 100 MMT. This would be up sharply from 71 MMT last year. It expects wheat production of 57 MMT, which would be a 50% increase over year-ago.
  • The market is largely ignoring ongoing deterioration in the HRW wheat crop. The amount of wheat rated "poor" to "very poor" rose 2 percentage points from last week to 41%, while wheat rated "good" to "excellent" slid one point.
  • Pro Farmer's weighted Crop Condition Index shows the HRW wheat crop declined by 5.3 points from last week to 246.62 on a 0 to 500 point scale, while the SRW wheat crop improved by nearly 5.5 points from last week to 378.34.
  • Spring wheat planting picked up to 67% complete last week, though this is still behind 76% complete on average. But recent and expected rain for the region is expected to result in more planting delays.
  • Gulf wheat basis is unchanged.

 

Live cattle futures have improved to moderately higher trade. Feeder cattle futures have also improved to post sharp gains, with the exception of the front month.

  • Wholesale beef prices continue to set new records, which is encouraging some short-covering, though buying interest is tempered by traders' continued concerns about high wholesale prices eventually forcing consumer pushback.
  • Choice boxed beef values rose another 21 cents this morning to another all-time high of $210.46. Select cuts eased 21 cents to $193.20. Movement was a light 85 loads.
  • Recent weak movement has remained a source or pressure as this is seen as confirming ideas lofty prices are not sustainable.
  • Expectations of at least steady cash trade this week is also supportive.
  • Weakness in the corn market and strength in live cattle futures is lifting most feeder cattle contracts. The front-month is a little weaker as it is trading in line with the cash index.

 

Lean hog futures have improved to trade slightly to moderately higher.

  • Traders are finding support from the pork cutout value, which rose $1.75 today and movement is off to a moderate start at 160.5 loads.
  • Cash hog bids are mostly steady today as packers are working to improve their margins, which are right around breakeven. Supplies are tightening seasonally, but demand is limited as packers bought ahead in preparation for the Memorial Day holiday. Some bids on either side of unchanged are also being seen due to variable demand.
  • The selloff in corn futures is also providing some support for hog futures.
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