Market Snapshot, Noon CT (VIP) -- February 12, 2013

February 12, 2013 06:01 AM


Corn futures are split amid bull spread unwinding, with old-crop futures 6 to 7 cents lower and new-crop futures up mostly 1 to 2 cents.

  • Traders are booking some profits in nearby contracts amid ideas South American supplies will soon ease the tight global corn stocks situation. This region has recently received favorable rain and more is in the forecast for Argentina and southern Brazil.
  • But 2- to 3-cent gains in March, May and June Gulf basis levels at midday could signal export demand is improving for tight U.S. corn supplies and/or limited supply availability.
  • Midwest grain buyers signal they are having a tough time getting farmers to sell corn after the recent price decline. Further tightening supplies, four of the 19 shuttered ethanol plants in the Midwest are reopening, according to AgResource.
  • Basis levels around the country remain historically strong.

Soybean futures are also split with old-crop futures 5 to 10 cents lower and new-crop futures 1 to 4 cents higher.

  • While anticipation of record-large South American supplies hitting the market is weighing on old-crop beans, tight U.S. bean supplies and uncertainty about the upcoming growing season are supporting new-crop beans.
  • Adding pressure to nearby bean contracts, China is expected to be notably absent as a bean importer this week due to its lunar new year celebrations.
  • But downside risk is limited as U.S. Bean carryover supplies are razor thin, as emphasized by historically strong soybean basis levels across the United States.
  • And as drought remains in effect across much of the western Corn Belt, traders are unwilling to push new-crop bean futures lower.

Wheat futures have extended early losses to trade double-digit lower in most contracts at all three locations.

  • Pressure on old-crop corn and beans is making it difficult for wheat to find buyers.
  • Recent precip in the western Oklahoma and Texas is adding pressure.
  • Wheat has also seen some technical selling as contracts moved through key levels of support this morning, hitting new yearly lows.
  • Light pressure also stems from news ABARES slightly raised its 2012-13 Australian wheat crop estimate to 22.077 MMT, though it left its wheat export forecast unchanged at 20.9 MMT.

Live and feeder cattle futures have softened to post moderate to sharp losses at midday. Nearby contracts are the downside leaders.

  • Lackluster demand is outweighing concerns about tightening supplies for cattle this week. Snow in the Southern Plains is expected to further tighten available market-ready cattle.
  • Last week, packers reduced their slaughter runs in an effort to improve margins, but this failed to spark improved demand for beef.
  • Thus, trades are working to narrow the discount futures hold to last week's mostly $125 cash cattle trade. Packers have yet to place bids, signaling late-week trade is likely.
  • Traders in the feeder cattle market are unwilling to add long positions in light of recent major technical chart damage. Traders are extending the discount the front-month contract holds to the cash index, signaling they anticipate further cash-market declines over the near-term.

February lean hogs remain slightly higher while deferred months are still mostly moderately lower at midday.

  • The continued slide in the pork cutout value has kept packer profit margins in the red, thus keeping the cash hog market steady to lower of late. Today, cash hog bids are steady to as much as $2.00 lower.
  • But a seasonal uptick in pork demand is likely ahead. A surge in movement this morning to 50.75 loads (already above yesterday's total) signals this may be getting started.
  • The February contract which expires Thursday is also benefiting from the roughly $2.50 discount it holds to the cash hog index.
  • There is also some concern about the impacts of Russia's import ban on U.S. meat which began yesterday.


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