Market Snapshot, Noon CT (VIP) -- August 21, 2012

August 21, 2012 06:49 AM

Corn futures are back near their daily highs with double-digit gains.

The corn market continues to react to poor crop yields from the Pro Farmer Midwest Crop Tour findings in South Dakota and Ohio yesterday and reports of varied yields from Indiana and Nebraska today.

A sharply lower U.S. dollar index and strong gains in the stock market amid hopes central banks will soon enact stimulus measures is an additional source of support.

But mixed Gulf basis levels at midday are limiting gains at it brings up questions about how high prices can rise before causing serious demand destruction.

Soybean futures continue to rise. Nearby contracts are now 40-plus cents higher, while deferred months are posting gains in the teens to 30s.

Crop Tour pod counts from South Dakota and Ohio were highly disappointing, which traders fear could foretell an even smaller bean crop than USDA estimated in August.

Thus traders believe more rationing is needed, especially as demand has remained strong at high prices.

Chinese customs data today shows the country's soybean imports for July of 5.87 million metric tons (MMT) were 10% higher than the previous year. Bean imports over the first seven months of 2012 are up 20% year over year.

Plus, recent export activity reports and Gulf basis action has reflected still-strong demand.

Wheat futures have improved to post gains in the teens at all locations.

Gains in the corn and soybean market along with a weaker dollar is making it easy for wheat to rally around global production concerns.

Black Sea production estimates continue to come down and talk is still circulating that the nation's exports will be curbed -- be it by export restrictions or simply tight supplies.

Plus, traders are beginning to pay more attention to dry soils in the southern U.S. as winter wheat planting season nears.

Live cattle futures have softened to post slight to moderate losses. Feeder cattle futures are posting moderate losses.

Futures are trading in line with last week's $120 to $121 trade and traders are engaging in some light profit-taking as they await more signs regarding this week's cash cattle trade.

Showlist estimates are tighter this week, but signs are mounting the boxed beef market is nearing a top.

This morning, the boxed beef market broke its recent trend of rising prices and slowed movement. Choice values fell 16 cents while Select cuts softened 5 cents. But the firmer prices spurred strong movement of 89 loads. This adds to ideas a market top is near.

Strength in the corn market is pressuring feeder cattle futures, though weakness in the U.S. dollar index is limiting the market's downside.

Lean hog futures are split with nearbys slightly lower and deferred months up slightly.

Hog supplies are increasingly seasonally with cooler temps, while Labor Day buying is slowing, which could point to more downside risk over the near-term. However, supplies are expected to tighten down the road, supporting deferred months.

Cash hog bids are steady to lower as packers are having no trouble securing supplies.

Pressure is being limited by now positive packer profit-margins and improvement in the pork cutout market yesterday. Pork movement this morning was strong.

Plus, the cash hog index remains at a steep premium to nearby futures contracts.

Traders are also readying for the Cold Storage Report tomorrow, which is expected to show frozen pork supplies as of July 31 at 561.8 million lbs., which is down 5.1% from last month but a record high for the month and 23.7% above last year.

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