Market Snapshot, Noon CT (VIP) -- December 12, 2012

December 12, 2012 06:08 AM
 

Risk appetite in the commodity sector was lackluster ahead of the conclusion of the Fed's policy-setting meeting today at 11:30 a.m. CT. The markets were little changed on news the Fed plans to extend its security purchases, as expected, and that it will keep interest rates at exceptionally low levels so long as the jobless rate is above 6.5% and inflation is under 2.5%. Traders will listen closely to Fed Chairman Ben Bernanke's quarterly press conference at 1:15 p.m. CT for his take on the fiscal cliff.

Corn futures have softened to post losses of mostly 5 to 6 cents at midday.

  • Profit-taking in the corn market has picked up slightly amid recognition of lackluster export demand for corn and general risk aversion amid fiscal cliff uncertainty.
  • Gulf basis levels fell 2 to 6 cents at midday for December through February delivery, adding to ideas export demand is stagnant.
  • Adding light pressure, a South Korean feed company favored South America in its purchase of four cargoes of corn this morning, as has been the trend.
  • Also, South American weather prospects have improved this week.

 

Soybean futures have improved to trade slightly higher in nearby contracts with deferred months seeing light losses.

  • The dollar softened slightly in response to the Fed's plan to expand its bond-buying program and its pledge to keep interest rates low. This encouraged some light short-covering in the soybean market.
  • But futures' inability to rally on daily bean sales announcements or yesterday's larger-than-expected cut to USDA's carryover projection signals a fresh source of support is needed.
  • This most likely stem from South America, but rains in Brazil and news Argentina's ag secretary says crops in the country are in good shape despite soggy conditions do not fit the bill.
  • News South Korea bought 110,000 MT of soybeans from Brazil overnight is also keeping pressure on soybeans.
  • A 3-cent improvement for December delivery in Gulf basis levels could signals fresh export news may be on the horizon.

 

Wheat futures have softened to trade mostly 7 to 9 cents lower in Chicago and Minneapolis with Kansas City seeing slightly greater losses.

  • USDA's decision to raise its 2012-13 wheat carryover forecast due to a lower export projection continues to weigh on the wheat market as it reminds traders U.S. wheat is not competitively priced.
  • Followthrough selling today confirms that yesterday's steep selloff was indeed a downside breakout.
  • A higher global 2012-13 production projection from USDA yesterday also eases concerns about dryness in the U.S. Southern Plains.

 

Live cattle futures continue to see narrowly mixed trade at midday. Feeder cattle futures remain slightly to moderately higher.

  • Some light cash cattle sales took place in Nebraska at $123 today -- steady with the lower end of last week's prices in that region -- but trade has yet to begin in earnest.
  • A surge in boxed beef prices yesterday was followed up by mixed prices this morning, with Choice values down 16 cents and Select cuts up 55 cents. The softer prices encouraged strong movement of 131 loads.
  • Adding to cash cattle trade uncertainty, showlist estimates are tighter this week, but packers continue to deal with deeply negative cutting margins.
  • Outside markets are mildly supportive following the Fed's decision to expand its bond-buying program.
  • Feeder cattle futures are benefiting from softer corn prices and the discount futures hold to the cash index.

 

Lean hog futures have improved to narrowly mixed trade.

  • Early profit-taking has given way to some light short-covering as recent strong pork movement and improved packer profit margins limit the market's downside risk.
  • Light support also stems from USDA's lower production estimates for 2012 and 2013 yesterday.
  • On the other hand, the cash hog market continues to soften due to plentiful near-term supplies.
  • The March contract is now trading near in line with the cash hog index, but the December contract that expires Friday is still at a $2.60-plus discount to the index.
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