Market Snapshot, Noon CT (VIP) -- August 10, 2012

August 10, 2012 07:05 AM
 

 

 

Corn futures have softened to post losses of roughly 3 to 7 cents across the board.

  • This morning USDA cut its production and yield estimates even more than expected, but market reaction signals this was already factored into prices, leaving the market vulnerable to some light profit-taking.
  • Also encouraging of this was USDA's carryover estimates that show high prices have indeed trimmed use. Carryover for 2011-12 is pegged at 1.021 billion bu., which is above last month's 903 million bu. projection.
  • USDA's carryover projection for 2012-13 is quite tight at 650 million bu., but the figure is in line with expectations.
  • Gains are also being limited by news China will sell state-owned reserves of corn, though tonnage is expected to be minimal. This is countered, however, by expectations the country will soon ease its monetary policy.
  • Gulf basis levels were steady to firmer at midday.

 

Soybeans have backed well off early highs with most contracts now posting gains in the teens.

  • Soybean futures are benefiting from ideas more supply rationing is needed after USDA slashed its 2012 production estimate and lowered its 2011-12 carryover estimate even more than expected. Its projection for 2012-13 carryover was near expectations but it still represents very tight supplies.
  • Emphasizing the need for prices to slow use was another daily soybean sale to China today for 290,000 metric tons (MT) for 2012-13 -- the fourth daily sale this week.
  • Also, Gulf basis levels are steady to higher (sharply higher for August delivery) this morning and steady at midday.
  • China's Ministry of Commerce announced China imported 5.87 million metric tons (MMT) of soybeans in July -- a 25-month high and 9.7% higher than year-ago.

 

Wheat futures continue to post losses in the teens to 20s at all locations.

  • Traders are taking profits out of wheat at midday as corn remains under pressure. With non-supportive USDA reports and a lack of fresh news from the Black Sea region, wheat futures have been unable to find buyers.
  • USDA's all wheat crop peg and 2012-13 carryover estimate were heavier than expected, easing domestic supply concerns.
  • USDA now puts the national average all wheat yield at 46.5 bu. per acre, up 0.9 bu. from last month. The spring wheat yield is estimated at 42.8 bu. per acre, up 2.4 bu. from July.
  • Losses in the stock market and crude oil futures signals investor risk appetite is lacking today, despite a weaker U.S. dollar index.

 

Live cattle futures are narrowly mixed at midday. Feeder cattle futures are enjoying slight to moderate gains in most contracts.

  • The market is still waiting for cash trade to get underway in earnest. Some sales did take place in the Corn Belt yesterday at $119 to $120 -- $3 above the week prior -- but trade has yet to get underway on the Plains, where sales took place at $118 last week.
  • Boxed beef price again firmed $1.77 for Choice cuts and 97 cents for Select values on strong movement of 124 loads this morning.
  • Drought and high feed costs will force producers to continue to liquidate herds more aggressively than earlier expected. As a result, USDA raised its beef production estimate and lowered its cash price projection for both 2012 and 2013.
  • Softer corn prices are supporting feeder cattle futures.

 

Lean hog futures continue to enjoy slight gains in all but the October contract, which is slightly lower.

  • Lean hogs are enjoying light short-covering today as the pork cutout value finally rose along with movement yesterday. But the market will need more concrete signs a low is in for the pork market before they will actively add long positions.
  • While supplies are currently expanding seasonally, USDA this morning raised its 2012 cash hog price projection for both 2012 and 2013 due to expectations that drought conditions tighten supplies going forward.
  • Today, cash hog bids are mostly flat to lower, though some firmer bids have arisen.
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