Market Snapshot, Noon CT (VIP) -- April 9, 2014

April 9, 2014 07:23 AM
 

Corn futures have turned lower after an initial burst to the upside following the release of USDA's Supply & Demand Report. Old-crop futures are 2 to 3 cents lower while new-crop futures are 1 to 7 cents lower.

  • Old-crop futures surged initially as traders were surprised by a deeper cut to 2013-14 projected carryover by USDA than expected. But the realization carryover supplies are ample nonetheless has encouraged traders to take profits on recent gains.
  • USDA dropped the carryover by 125 million bu. to 1.331 billion bushels. The cut in carryout came entirely from an increase in projected exports.
  • Total global corn stocks were reduced, as well, to 158 MMT, down from the previous 158.47. But traders were looking for a deeper cut to 157.75 MMT.
  • The Brazilian corn crop was lowered 2 MMT from March.
  • Forecasts for a return of cold weather and frost next week are restraining losses in new-crop futures.
  • Ethanol production declined 26,000 barrels per day (bpd) to 896,000 bpd the week ended April 4. But imports more than tripled to 38,000 bpd. As a result, ethanol stocks rose 532,000 barrels to 16.41 million barrels.
  • Interior basis points are steady on limited farmer selling.

 

Soybean futures have pared early gains to trade 3 to 7 cents higher in old-crop with new-crop seeing lighter gains.

  • Nearby soybean futures contracts are higher as USDA surprised traders with a steeper-than-expected cut in projected 2013-14 carryover supplies.
  • USDA reduced old-crop carryover by 10 million bu. rather than the 6-million cut expected by the trade. USDA pegs carryover at a tight 135 million bushels.
  • Meanwhile USDA South America crop projections came in about as expected.
  • The initial report reaction carried May futures as much as 22 cents higher and above $15.00, which has served as technical resistance of late. But prices have since faded. Bullish traders will be looking for a close above $15.00 as a signal more upside is ahead.
  • Worries over forecasts for a return to cold temps and possible frost next week is also providing support for new-crop futures.
  • Interior soybean basis is flat on limited farmer selling.

 

Wheat futures have slumped following a bearish USDA report. SRW wheat futures are down 10 to 13 cents in 2014 contracts; HRW futures are off 7 to 9 cents; HRS futures are down 8 to 10 cents.

  • Traders increased their negative thinking following the release of USDA's Supply & Demand Report that showed global wheat stocks rising to 186.68 MMT, up from USDA's March estimate of 183.81 MMT.
  • USDA projected old-crop carryover supplies at 583 million bu., right in line with trader expectations.
  • The rise in global supplies means more global competition for U.S. wheat and increased chances U.S. wheat will again become overpriced.
  • Pro Farmer's first weighted Crop Condition Index of the season shows the HRW crop down 64 points from last fall to 299, while the SRW crop declined 30 points to 348 (scale of 0 to 500 points, with 500 representing perfect).The HRW rating is still above year-ago at this point, while the SRW crop is below year-ago.
  • Rains are expected to again miss key winter wheat production areas this week.

 

Live cattle futures are fractionally mixed with the front three contracts posting mild gains. Feeder cattle futures are moderately higher.

  • Nearby live cattle contracts are getting a small lift from their deep discount to recent cash trade, which was at $148 to $150 last week.
  • Traders continue to look for cash prices to trade lower this week, but even so, a $2 to $3 discount to early asking prices at $146 is too large.
  • Packers are reluctant to bid up for supplies are they continue to face negative cutting margins of more than $100 per head.
  • The boxed beef market fell this morning with Choice beef down $1.79 and Select off $1.12. But movement is strong on the lower prices at 137 loads.
  • USDA in its Supply & Demand Report raised its 2014 beef production estimate slightly and raised its average cash steer price by $5.50 to $147.50. It also boosted its beef export forecast.
  • Feeder cattle futures are firmer on the slightly higher nearby live cattle futures and setback in corn futures.

 

Lean hog futures are sharply higher with some contracts touching the $3.00 daily limit.

  • Lean hog futures trimmed losses early on short-covering, but a strong upswing in both wholesale pork prices and movement have pushed prices up sharply.
  • Wholesale pork movement surged this morning to 309.79 loads. The increase came as the pork cutout value surged $2.01.
  • On the negative side, slaughter hogs continue to gain weight. Average hog weights in Iowa and Minnesota for the week ended April 5 hit a record-high 285.5 lbs., topping last week's record by 0.5 pounds. This is also an 8.3 lb. increase over year-ago.
  • The heavier hog weights are offsetting some of the impact of the porcine epidemic diarrhea virus (PEDV).
  • Cash prices are steady to lower due to higher supplies and reduced slaughter schedules. But the surge in wholesale pork has moved packer cutting margins back into the black, which will stabilize cash prices.
  • The April futures contract is finding support from its steep discount to the cash hog index.
  • USDA today brimmed its projected 2014 pork production by 1.9% from 2013 and raised its average cash hog price by $6.50 to $73.50. It also projected lower pork exports.
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