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

December 20, 2012 06:08 AM
 

Corn futures have moved off their earlier lows to trade roughly 6 to 8 cents lower.

  • Spillover from soybeans, a now-choppy U.S. dollar index and broad risk aversion amid fiscal cliff uncertainties continue to weigh on the corn market.
  • Plus, corn is seeing some technical-based followthrough selling today as the market broke through key levels of support yesterday.
  • Also, this morning's weekly export sales report was another reminder of lackluster demand. Sales of 114,400 MT for 2012-13 and 5,800 MT for 2013-14 were well below expectations.
  • Also, the Climate Prediction Center's Seasonal Drought Outlook calls for some improvement for areas of the eastern Corn Belt, though this is countered by its forecast for drought to persist or intensify west of the Mississippi River.

 

Soybean futures have softened to post losses in the teens to 20s in all but far-deferred contracts ahead of this afternoon.

  • The dollar's move off its lows accelerated selling in the soybean market.
  • But January and March continue to respect near-term support at the psychological $14.00 mark, though some deferred contracts have inched through that level.
  • The motivation for today's selloff largely stems from news China canceled another 540,000 MT of soybean buys for 2012-13 today, which follows cancellations of 300,000 MT by the nation and 120,000 MT in cancellations by unknown destinations earlier this week.
  • The market remains uncertain as to whether this signals China is planning to book U.S. supplies at lower prices or if it intends to source its needs from South America.
  • Traders are ignoring a weekly export sales pace that is running 31% ahead of last year's pace and today's solid sales tallies of 619,400 MT for 2012-13 and 10,500 MT for 2013-14. Rather, they are focusing on the fact the total fell just short of expectations.

 

Wheat futures continue to see double-digit losses in most contracts at all three locations with Chicago leading to the downside with losses around 14 to 17 cents.

  • Spillover from corn and especially soybeans makes it difficult for wheat to find any buyers.
  • Also, precip overnight and today on the Central Plains makes it difficult for the bulls to get excited about widespread and severe drought in winter wheat country that is not expected to improve any time soon.
  • Plus, the markets are seeing some technical selling as wheat broke through near-term support levels today.
  • Outside markets are a nonevent as the stock market is lightly favoring the downside and the U.S. dollar index is chopping around unchanged.

 

Live cattle futures have softened to mostly moderately lower trade, while feeder cattle futures are seeing losses ranging from slight to sharp.

  • Very light cash cattle sales occurred this morning in Texas at $126, which is up $1.50 from the week prior.
  • Tighter showlist estimates for the Southern Plains and concerns the winter storm on the Central Plains and Midwest may disrupt transportation encouraged a few packers to raise bids, but most have maintained their lower bids as they do not believe a near-steady decline in Choice boxed beef values this week justify higher cash prices.
  • This morning's boxed beef action fits the trend this week, with Choice cuts falling $1.57 and Select values firming 79 cents; movement was decent at 103 loads.
  • Nearby futures are at a steep premium to last week's cash prices, limiting upside potential but also signaling the market fully anticipates higher cash prices.
  • Traders are also reducing risk ahead of Friday's Cattle on Feed Report, even though it's expected to reflect tightening supplies.
  • Feeder cattle futures are also seeing profit-taking after yesterday's strong gains. The front-month contract's premium to the cash index is adding incentive to do so.

 

Lean hog futures are posting slight to moderate losses at midday.

  • Today is a risk-off day across the commodity sector. This is encouraging profit-taking after yesterday's impressive rally.
  • Also, some are worried Friday's Cold Storage Report may take the wind out of bulls' sails as USDA is expected to report frozen pork supplies at the end of November at a record high for the month of 589.3 million lbs, which would be down 3.7% from October but up 17.9% from year-ago.
  • The market continues to weigh the supply implications of the Midwest blizzard that began last night against the fact that packers are buying for a holiday-shortened kill schedule.
  • Also, the pork cutout value softened yesterday, pulling packer profit margins into the red and keeping the cash hog market mostly steady today. Morning pork movement was solid at 23.5 loads.
     
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