Market Snapshot, Noon CT (VIP) -- August 20, 2012

August 20, 2012 06:57 AM
 

Corn futures have extended gains to trade double-digit higher in most contracts.

  • Pro Farmer Midwest Crop Tour reports from South Dakota, Ohio and Indiana thus far have generally pointed to worse-than-expected yields in those fields that have not been chopped for silage, encouraging traders to build more premium into prices.
  • Plus early harvest results from the southern Corn Belt have been disappointing.
  • Meanwhile, USDA announced Mexico purchased 121,000 metric tons (MT) of U.S. corn this morning, most of which is for 2012-13. This signals the country believes even higher prices may lie ahead.
  • News Japan's corn-for-feed use dropped to a 20-year low of 43.3% in June is keeping bullish enthusiasm in check.
  • Gulf basis levels were steady to lower at midday.

 

Soybean futures have rallied to post double digit gains, with nearby contracts 20-plus cents higher.

  • The Pro Farmer Midwest Crop Tour is placing more attention on the small soybean crop.
  • Recent daily and weekly export sales tallies signal high prices have yet to significantly slow demand. This morning, Gulf basis levels are steady to firmer; at midday they were mixed.
  • Traders are ignoring news China National Grain and Oils Information Center (CNGOIC) says it expects the country's soybean imports to fall to 25.5 million metric tons (MMT) the second half of 2012 compared to 29.05 MMT the first half of the year.

 

Wheat futures have firmed to post slight gains in most contracts at all locations.

  • Spillover from the corn market has returned buyers to the wheat pit.
  • Support also comes from news SovEcon has cut its Russian wheat forecast to 39 million metric tons (MMT) to 41 MMT from 40.5 MMT to 42.5 MMT previously, due to disappointing early harvest results.
  • Concerns about dryness in western Australia also remain close at hand.
  • But ideas high U.S. wheat prices may translate to reduced export demand is making traders cautious buyers.

 

Live cattle futures continue to enjoy light gains in most contracts. Feeder cattle are posting slight gains amid ideas the downside has been overdone.

  • Futures are trading in line with last week's firmer cash cattle trade as traders await showlist estimates for this week.
  • This morning, Choice boxed beef values rose 36 cents while Select cuts surged $1.52 amid late Labor Day buying, but movement was a sluggish 56 loads. This gives weight to ideas a top may be near.
  • Adding to this idea is a steady stream of deliveries against the August contract, though demand for these deliveries has been decent.

 

Lean hog futures have softened to mixed trade, with nearbys slightly lower and deferred months slightly higher.

  • Lean hog futures are benefiting from short-covering on ideas the downside has been overdone. A weaker U.S. dollar index is also encouraging to this end.
  • Cash hog bids this morning are mixed. While supplies are expanding seasonally, packers have ramped up production amid improved profit margins. This week's kill is expected to reach 2.2 million head for the first time since January.
  • Gains in the pork cutout value Friday are an additional source of light support.
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