Market Snapshot, Noon CT (VIP) -- February 21, 2013

February 21, 2013 06:02 AM
 

Corn futures are 4 to 6 cents lower due to expectations for a recovery in U.S. crop production this year and pressure from outside markets.

  • Corn remains weaker as traders digest this morning's projections released by USDA Chief Economist Joseph Glauber at the USDA Agricultural Outlook Forum.
  • Glauber said he expects a recovery in yield to produce a record 14.53 billion bu. of corn this year. He projected 2013 planted corn acres at 96.5 million.
  • Adding to the weaker tone are negative outside markets. The dollar index is stronger after the FOMC indicated the Fed could begin backing off from its quantitative easing actions.
  • Traders are also recognizing the potential for some drought relief. The Climate Prediction Center calls for above-normal precip across the central Corn Belt next month.
  • The International Grain Council (IGC) raised its 2012-13 global corn carryover projection by 1 MMT to 114 MMT, although this is still below 131 MMT last season.
  • Gulf corn basis is a penny firmer for immediate delivery to stand 64 cents above March futures. This is mostly a reflection of tight supplies.

 

Soybean futures remain mixed, with old-crop futures 3 to 11 cents higher and new-crop down 2 to 8 cents.

  • Old-crop soybean futures are getting a lift from indications of ongoing strong demand for U.S. soybeans. Gulf soybean basis is 2 cents firmer to stand 80 cents above March futures for immediate delivery.
  • Traders are also reacting to the potential for the U.S. export window to remain open a bit longer than anticipated due to the late start of harvest in Mato Grosso and the potential for lengthy docker worker strikes in Brazil due to the privatization of its ports.
  • Adding to indications of strong demand, USDA announced a 130,450 MT soybean sale to an unknown destination (rumored to be China), with 75,450 MT for 2012-13 and 55,000 MT for 2013-14.
  • New-crop futures, however, are being pressured by Glauber's outlook this morning, in which he projected a record 2013 U.S. soybean crop of 3.405 billion bu. on 77.5 million planted acres.
  • The IGC trimmed its global soybean carryover projection by 1 MMT to 28 MMT, although this is up from 23 MMT last season.

 

Wheat futures have extended losses to post double-digit declines at midday.

  • A combination of spillover from corn and negative outside markets are weighing on wheat futures.
  • Adding to the negative tone is the winter storm that swept across the Plains.
  • But while this week's precip event was better than expected, this morning's Seasonal Drought Outlook reveals little hope of drought improvement across the Southern Plains this spring. Still, recent precip through the region has temporarily eased HRW crop concerns.
  • Traders are generally ignoring this morning's USDA announcement of an 110,000 MT export sale of soft red winter wheat for delivery to unknown destinations. Of the total 55,000 MT is for 2012-13 and 55,000 MT is for 2013-14.
  • USDA's Glauber projects 2013 planted wheat acreage at 56 million, which if realized would be up just slightly from 55.7 million in 2012.
  • Also this morning, the IGC raised its 2012-13 global wheat carryover projection by 2 MMT to 176 MMT, although this is still 21 MMT lower than last season.

 

Live cattle futures are narrowly mixed in lackluster trade.

  • Concerns about beef demand and packers' negative margins are limiting buying to short-covering in the cattle pits this morning.
  • Strength in the dollar index and weakness in the U.S. stock market is also limiting buying.
  • Boxed beef prices are softer this morning, with Choice down a dime and Select down a quarter on slowed movement of 96 loads. Prices need to move higher to suggest a seasonal low is in the works.
  • Traders will begin to more actively even positions ahead of tomorrow afternoon's Cattle on Feed Report, which is expected to show On Feed at 93.8%, Placements at 100.3% and Marketings at 104.7% of year-ago levels.
  • Cash cattle trade has been moderate at $123, which is steady with last week. February futures are trading at a premium to the cash market.
  • Despite weakness in the corn market, feeder cattle futures are slightly lower.

 

Lean hog futures are slightly to moderately lower amid demand concerns.

  • Lean hog futures have extended early losses, with April hogs testing support at yesterday's low of $82.12 1/2 on demand concerns.
  • News yesterday that China is considering testing U.S. pork for ractopamine raised concerns about export demand, as China is a top customer of U.S. Pork
  • The cash hog market is steady to $1 lower again this morning as packers say they are having no difficulty securing supplies ahead of the storm and are finally enjoying profitable margins.
  • April lean hog futures are trading at around a $3 discount to the cash index, which signals traders still maintain a bearish attitude toward the market.
  • Lean hog futures have moved into severely oversold territory according to the 9-day Relative Strength Index.
     
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