Market Snapshot, Noon CT (VIP) -- February 27, 2013

February 27, 2013 06:02 AM
 

 

Corn futures have softened to trade marginally to 4 cents lower in all but the front-month contract, which is slightly higher.

  • Traders are covering short positions in March corn futures ahead of the first delivery day tomorrow. But the rest of the market is seeing light profit-taking pressure as fresh news is lacking today.
  • While there have recently been some signs demand for corn is improving after the recent price break, the market recognizes that any substantial rally in corn prices will likely choke off demand.
  • In addition, recent precip in the Midwest reminds traders of expectations for production to rebound this year.
  • Weekly ethanol production rose 1.9% last week to 812,000 barrels per day, slightly trimming ethanol stockpiles to 19.4 million barrels.
  • Outside markets are also limiting pressure, as the U.S. dollar index is softer and the stock market and crude oil futures are enjoying strong gains.

 

Soybean futures remain split with old-crop futures 2 to 10 cents higher and new-crop futures posting fractional to 6-cent losses.

  • Traders are engaging in bull spreading today.
  • Old-crop futures are benefiting from USDA's announcement that China purchased 120,000 MT of U.S. soybeans for 2013-14 and an unknown destination purchased 120,000 MT of soybeans for 2012-13. This signals importers cannot wait for Brazilian shipping delays.
  • Meanwhile, expectations for recovery in U.S. bean production this year is weighing on new-crop futures, especially considering recent precip in the Corn Belt.
  • Nearby old-crop futures are also benefiting from some technical buying as these contracts have been testing near-term resistance at the 100-day moving average the past few days.

 

Wheat futures continue to enjoy gains around 4 to 6 cents at all three locations today.

  • Dollar weakness is encouraging short-covering in the wheat market on ideas the downside has been overdone recently.
  • Support also comes from news Russia's ag ministry says it plans to start buying grain from producers in August or September to replenish its intervention stocks. And the head of Russia's grain production lobby says market grain supplies will remain tight through 2013-14.
  • Egypt has signaled it has 2.3 MMT of wheat in strategic reserves, which is enough supplies to last through May. Despite questions about its financial and political state, Egyptian officials say the government has priority financing for wheat imports.
  • Also, while winter wheat country has recently received beneficial precip, the crop is still in tough shape according to state condition reports.

 

Live cattle futures have improved to post slight to sharp gains in all but the October contract, which is slightly lower. Feeder cattle futures are posting slight losses.

  • Expectations are for firmer cash cattle trade compared with last week's $123 to $125 trade. But as packers have yet to place bids, late-week trade is likely.
  • Showlists are lighter this week and the winter storm that stretched from Texas to the Corn Belt this week is thought to have slowed cattle weight gain.
  • Also, the boxed beef market has given signs it may be working on a low. This morning, Choice cuts firmed 82 cents and Select surged $2.03. Movement also improved to 134 loads.
  • But upside risk will likely remain limited to short-covering through week's end as traders remain concerned about the possibility of meat inspector furloughs associated with Friday's likely sequester.
  • Feeder cattle futures are seeing some light followthrough selling today.

 

Lean hog futures continue to post slight losses in most contracts.

  • Softer pork prices yesterday and continued weakness in the cash hog market is weighing on the lean hog market today.
  • Packers are thought to be well supplied for near-term needs and average hog weights rose nearly a pound in major production regions last week. Thus, cash hog bids are again steady to around $1 lower today.
  • But downside risk is being limited by the technically oversold condition of the market.
  • Plus, traders expect Easter ham buying to soon give the pork market a boost. While the pork cutout value slid yesterday, movement did improve from recent days.
  • There is also talk that increased financial stress to consumers via higher taxes and lofty gas prices could cause them to favor cheaper pork and poultry over beef.
  • Also adding light pressure, the April lean hog contract is now at nearly a $1 premium to the cash hog index.
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