Market Snapshot, Noon CT (VIP) -- February 1, 2013

February 1, 2013 05:56 AM
 

Corn futures have weakened, with nearbys leading losses, trading mostly around 3 to 4 cents lower.

  • Corn futures softened on news Informa Economics reportedly raised its Brazil corn crop estimate by 4.1 MMT to 70.3 MMT. This was partially offset by news the firm also reportedly lowered its Argentine corn crop estimate to 25 MMT, from 27 MMT.
  • Traders are hesitant to add risk until the results of the rain-producing system expected to transverse Argentina and Brazil this weekend are known. Overnight rains in Argentina were disappointing.
  • Friendly outside markets are also limiting selling interest in the corn market.
  • Some traders are cautiously optimistic demand may be improving thanks to recent improvement in Gulf basis. But this morning and at midday, Gulf basis was a penny lower for April and steady for other months.

 

Soybean futures have backed off gains seen just after the start of pit trading to trade mostly 1 to 5 cents higher with nearbys leading to the upside.

  • Soybean futures softened on news Informa Economics reportedly raised its Brazil soybean production estimate by 1.1 MMT from January to 84 MMT.
  • The firm also reportedly lowered its Argentine production peg by 3.9 MMT from last month to 54.5 MMT due to dryness in the country.
  • This week, soybeans took out key areas of resistance, spurring some technical buying as the market appears headed for a test of the December highs.
  • This rally was encouraged by dryness concerns in South America and still-impressive soy story from China.
  • Recent forecast updates are also supportive as forecasters scaled back rain chances for next week and call for a return of heat and dryness around midweek.
  • This week, there were three daily sales announcements to China totaling 615,000 MT of new-crop soybeans.

 

Wheat futures have reversed course to trade mostly 9 to 11 cents lower in the nearby contracts at all three exchanges.

  • Wheat futures are seeing end-of-the-week profit-taking pressure, which has spurred some sell stops to extend losses.
  • Without fresh demand news, wheat is vulnerable to additional profit-taking pressure.
  • Early support came on spillover from neighboring pits, but with corn also weakening, that support is gone for the wheat market.
  • Meanwhile, dryness across the U.S. Central and Southern Plains remains a concern, but the crop is in dormancy, which lowers traders' urgency about "trading" this concern.
  • March Chicago wheat futures have slipped below support to post a fresh weekly low, but remain within the boundaries of the three-week consolidation range.

 

Live cattle futures have softened to post slight losses in most contracts. Feeder cattle futures continue to post slight losses.

  • Traders are unwilling to add long or short positions ahead of this afternoon's release of the Cattle Inventory Report. Pre-report expectations are that it will show all cattle and calves at 98.2% and the annual calf crop at 97.9% of year-ago levels.
  • Another morning of declines in the boxed beef market is giving bears an edge as it raises concerns about consumer demand. Choice boxed beef values fell $1.33 this morning and Select cuts fell 69 cents. Movement was again solid at 112. This has pulled packer profit margins deeper into the red.
  • Cash cattle trade took place at $125 on the Southern Plains earlier this week and a few pens have traded in Nebraska at $125.25 today. Futures are well above these prices, however.
  • Outside markets are limiting pressure as the U.S. dollar index is under pressure and the stock market enjoying strong gains.

 

Lean hog futures have also softened a touch but remain mixed.

  • Cash hog bids are steady to as much as $3 higher today. This is giving bulls an advantage as they ready positions for the weekend.
  • These firmer cash prices can be attributed to weather-related disruptions early in the week and frigid temps the past few days in the Midwest that make packers unwilling to send hogs to market.
  • But packer profit margins are deep in the red due to recent firmer cash bids and losses in the product market. This will limit packer willingness to raise bids once readily available hog supplies return to more "normal" levels.
  • But the seasonal trend is for tightening supplies this time of the year, which will keep a floor under both the cash and futures markets. Plus, buying for the Easter holiday should give the pork market a boost in the next few weeks.
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