Corn futures remain mostly 5 to 10 cents lower, with deferred contracts leading losses.
- Fresh news is limited in the corn market today. Therefore, traders are taking advantage of a firmer dollar by booking profits ahead of USDA's Supply & Demand Report Friday.
- Pre-report expectations are for USDA to raise its U.S. carryover estimate slightly from last month to 615 million bu. due to slower demand. But the market also expects USDA to cut its world carryover estimate slightly to 115.74 MMT.
- Light pressure also stems from a wetter forecast for southern Brazil and Argentina next week, according to some weather models.
- Also emphasizing lackluster demand, weekly ethanol production of 774,000 barrels per day (BPD), while an improvement from the week prior, still represents slow demand.
- Spillover pressure from soybeans is adding light pressure.
Soybean futures have pared early losses to trade mostly 8 to 13 cents lower, with nearby contracts seeing the lightest losses.
- Soybean futures have seen some light short-covering as some viewed early losses as overdone considering tight U.S. soybean supplies and South American weather uncertainty.
- Some weather models call for rain next week in southern Brazil and Argentina, though heat and dryness are expected to linger in these regions through the weekend.
- Meanwhile, Chinese soybean buys are expected to slow from their red-hot pace next week as the country will be celebrating its lunar holiday.
- But recent strong demand is expected to translate to tighter U.S. soybean stocks of 129 million bu. in February, down 6 million bu. from the month prior when USDA adjusts its balance sheet Friday.
- USDA is also expected to show slightly tighter global soybean stocks of 59.22 MMT, compared to 59.46 MMT in January.
Wheat futures firmed ahead of midday to trade mostly 5 to 6 cents higher at all three locations.
- Wheat futures firmed ahead of midday as the market viewed the downside as overdone, especially considering Russia's decision yesterday to lift its 5% import duty on grains.
- And while there is rain in the forecast for the Southern Plains this weekend, much more is needed to ease substantial drought in the region.
- But gains are being limited by talk India will free additional government reserve wheat stocks for exports as the region currently has surplus stocks and the region is expected to produce a bumper crop this year.
- Traders are also reducing some risk exposure ahead of Friday's Supply & Demand Report. Traders expect USDA to raise its wheat carryover estimate by 12 million bu. from last month to 728 million bu. and for it to cut its global wheat carryover projection by 1.1 MMT to 175.54 MMT.
Live cattle futures are posting slight to moderate losses at midday. Feeder cattle futures have reversed course and are posting moderate to sharp losses.
- Traders continue to book profits as they wait for cash cattle trade to begin. Expectations are for higher cash prices, but futures are already at a premium to last week's prices.
- Last week, sales took place at $125 on the Southern Plains while northern locations saw slightly higher prices.
- Adding to the cautious tone, after posting gains the past two days, Choice cuts fell 51 cents this morning, though Select cuts firmed $1.03 and movement was solid. This shook some confidence that the boxed beef market has put in a low.
- A firmer U.S. dollar index is also limiting livestock buying interest.
- Technical selling is also weighing on feeder cattle futures as the market broke through near-term levels of support today.
Lean hog futures remain under moderate pressure at midday.
- Traders remain concerned about the recent slide in the pork cutout value and the fact that this has drawn packer profit margins deep into the red.
- Packers are paying steady to higher prices for cash hogs today, which is further deteriorating cutting margins.
- Cash strength stems from tightening market-ready hog supplies. The average hog weight for Iowa and southern Minnesota fell 1.1 lbs. last week.
- Strength in the U.S. dollar index is creating a risk-off appetite in the commodity sector today.
- Pressure on nearby contracts is being limited by slight discount they hold to the cash index.