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

December 21, 2012 06:04 AM
 

Corn futures are posting gains around 1 to 3 cents with nearby contracts as the upside leader.

  • Corn traders are engaging in light short-covering ahead of the weekend and the holidays. Spillover strength from soybeans is adding light support.
  • But today's light gains are not enough to correct the damage corn futures have done to the charts this week. Signs export demand is improving and/or a South American supply scare is needed to spark buying interest. But at present, neither appears imminent.
  • Growing conditions in Brazil are generally favorable, though the Argentine crop is under some stress due to persistent rain.
  • And it is too early for the market to begin the acreage battle in the United States.
  • News South Korea decided to include the U.S. as a possible source in its purchase of 193,000 MT of optional origin corn is providing light support.

 

Soybean futures have extended gains to trade 20-plus cents higher through the May contract, with deferred months posting gains in the teens.

  • Traders are covering short positions ahead of the holidays as they wait to see if the recent price break attracts bargain buying from global end-users.
  • This week's selloff was largely encouraged by news of soybean purchase cancellations totaling nearly 1 MMT, mostly from China.
  • And while this may simply signal it is worth China paying the cancellations fees to book supplies at today's lower levels, it did "scare" investors.
  • The cancellations along with improved water levels on the Mississippi River have also caused Gulf basis levels for near-term delivery to soften.

 

Wheat futures continue to enjoy 1 to 4 cent gains in Chicago, while Minneapolis and Kansas City are seeing even lighter gains.

  • Light short-covering is supporting wheat futures today, though this is doing little to correct the recent, sharp downside breakout.
  • Light support comes from news Taiwan bought 75,600 MT of U.S. wheat overnight. The market is starting to see purchases indicating U.S. wheat is finally benefiting from tightening Black Sea supplies. The December price slide was helpful to that end.
  • But recent precip in the Central Plains is limiting buying interest, though much more is needed to relieve widespread, significant drought.
  • Outside markets are also a limiting factor as they reflect an aversion to risk due to ongoing fiscal cliff uncertainty.

 

Live cattle futures are steady to lower heading into afternoon trade. Feeder cattle futures have also trimmed losses to trade just slightly lower.

  • So far, yesterday's light cash cattle trade in the Southern Plains at $126 has been the extent of trade. This along with mixed boxed beef action this week are telling of generally lackluster demand this time of year.
  • But, cash and beef prices should rise in 2013 as supplies are expected to tighten.
  • The markets anticipate this will be reflected in the Cattle on Feed Report this afternoon, but they are nevertheless unwilling to add risk ahead of what will be an extended holiday weekend for many.
  • Today's $1.16 rebound in Choice boxed beef values and a 52-cent gain in Select cuts has helped futures to trim losses, however. Movement was decent at 97 loads.
  • Feeder cattle futures have also pared losses as it became apparent corn's rally would be quite limited.

 

Lean hog futures have improved to trade steady to slightly higher in most contracts.

  • Action in the lean hog market can largely be chalked up to pre-report positioning.
  • Cash market activity is light today as snow and ice from the recent Midwest storm continues to disrupt hog movement.
  • Packers are bought ahead for next week's holiday-shortened schedule. Plus, recent declines in the pork market have pulled cutting margins into the red, which is further limiting their willingness to raise bids.
  • But expectations are pork demand will improve with the start of 2013 as retailers begin to feature more economical pork products and hog weights are already starting to decline. This makes traders unwilling to be short hog futures.
  • Heavy losses in the stock market and strong gains for the U.S. dollar index are also limiting livestock buying.
     
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