Market Snapshot, Noon CT (VIP) -- December 4, 2012

December 4, 2012 06:07 AM
 

Corn futures have softened to trade mostly 3 to 5 cents lower with nearby contracts leading to the downside.

  • Profit-taking in the corn market picked up as soybeans softened. Risk appetite is lacking across the investment world today.
  • Also encouraging profit-taking was Taiwan's purchase of a cargo of corn from Brazil. This reminds the market U.S. corn is not competitively priced.
  • But corn's downside remains limited by concerns about South American production. Reminding the market of rainy conditions in Argentina and dry weather in Brazil, Informa Economics reportedly today lowered its production forecast in Argentina by 1 MMT from November to 27 MMT and its Brazilian estimate by 600,000 MT to 66.2 MMT.

 

Soybean futures have softened to post losses in the teens.

  • Soybean futures softened on news Informa Economics reportedly raised its production forecast for Brazil from last month by 150,000 MT to 81.4 MMT, which is well above USDA's forecast.
  • However, the firm also reportedly lowered its Argentine soybean production estimate by 1.1 MMT from November to 27 MMT due to pervasive rains.
  • Also, news Taiwan passed on a tender to buy U.S. soybeans raises concerns about the competitiveness of U.S. beans.

 

Wheat futures have softened to post losses around 7 to 8 cents in Chicago and Kansas City. Minneapolis wheat is seeing lighter losses.

  • Broad risk aversion and spillover pressure from corn and soybeans caused wheat futures to soften.
  • Ongoing uncertainty regarding whether Ukraine will limit exports remains a source of light pressure. Most recently, the country's ag ministry said it's hopeful exporters will adhere to the previously agreed-to cap on wheat shipments that has already been hit.
  • While severe dryness on the Plains limits wheat's downside risk, it is too early in the season for this to inspire active buying interest.
  • News ABARES lowered its estimate of Australian wheat production to 22 MMT, which would be down 26% from last season, is also limiting pressure.

 

Live cattle futures have softened to moderately lower trade. Feeder cattle futures are slightly lower.

  • Last week's $2 to $3 lower cash cattle trade along with heavier showlist estimates this week continue to weigh on live cattle futures.
  • Deeply negative packer profit margins are also keeping a damper on cash cattle expectations and demand.
  • And thus far this week, the boxed beef market has not given bulls anything to get excited about. This morning, Choice cuts fell 19 cents and Select firmed 89 cents. Movement slowed to 84 cents.
  • Outside markets also provide little direction. While the U.S. dollar index is favorably lower, losses in crude oil futures and the stock market point to limited risk appetite.
  • Feeder cattle futures are slightly lower on spillover pressure from live cattle.

 

Lean hog futures remain split with nearbys slightly higher and deferred slightly to moderately lower.

  • Nearby contracts are benefiting from a steady to higher cash hog market today as some packers are still in need of supplies and are being forced to raise bids despite tighter profit margins. Some packers have recently seen margins slip into the red.
  • December lean hogs are also benefiting from ideas the downside was overdone yesterday. Gains in the contract today signal that traders expect the cash market to continue to rise over the near-term.
  • Holiday buying is expected to keep the product market trending higher over the near-term. Morning pork movement has already nearly matched yesterday's total at 25.25 loads.
  • Risk appetite is low today amid ongoing fiscal cliff uncertainty. This is making profit-taking the dominant action in the commodity sector today.
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