Market Snapshot, Noon CT (VIP) -- February 7, 2013

February 7, 2013 06:05 AM
 

Corn futures have softened to trade mostly 8 to 12 cents lower at midday.

  • Traders continue to ready positions for a Supply & Demand Report that is expected to reflect lackluster corn demand.
  • Setting the tone, weekly export sales of 168,900 MT for 2012-13 and net sales reductions of 8,500 MT for 2013-14 emphasize slow demand, though the tally did match expectations.
  • Strength in the U.S. dollar index and broad risk aversion are adding pressure.
  • Also, Brazil's Conab has raised its corn production estimate to 76 MMT from 72.2 MMT last month. However, more than half of this total is expected to be safrinha corn, which is just being planted.
  • Demand fundamentals are overshadowing scaled back precip chances and coverage for Argentina today.

 

The front-month soybean contract is just marginally lower, while deferred months are 4 to 15 cents lower.

  • Despite an impressive weekly export sales tally of nearly 1.67 MMT, roughly split between old and new-crop beans, the bean market is under pressure.
  • Traders are focused on reducing risk ahead of tomorrow's Supply & Demand Report, which is expected to favor market bulls with a cut to world and domestic carryover.
  • But private crop watchers continue to raise production estimates for Brazil, though recent heat and dryness remain concerning in southern Brazil and Argentina. Conab, Brazilian equivalent of USDA, raised its Brazilian soybean forecast to a record 83.4 MMT.
  • Sharp gains in the U.S. dollar index today adds pressure.

 

Chicago wheat futures remain mostly 4 to 11 cents lower, while Kansas City and Minneapolis are seeing slightly lighter losses.

  • Spillover from corn and strength in the U.S. dollar index is pressuring wheat today.
  • Plus, favorable rain is falling in Texas and more is expected in the Gulf Coast states over the next three days.
  • Also, weekly wheat export sales of 290,800 MT for 2012-13 and 10,000 MT for 2013-14 met expectations, but the tally still represents slow demand.
  • Tomorrow's Supply & Demand Report is expected to reflect lackluster demand. Pre-report expectations are for USDA to raise its U.S. carryover estimate by 12 million bu. to 728 million bu.
  • But selling interest is being kept in check by news Russia's ag minister says the country may consider importing grain to ease tight government intervention stocks if prices are attractive.

 

Live cattle futures have improved to mixed trade with nearbys favoring the upside and deferred months the downside. Feeder cattle futures are posting slight to moderate losses.

  • Some light short-covering has returned to live cattle as most still expect steady to higher cash cattle trade. Thus, traders are comfortable leaving nearby futures at a premium to last week's $125 cash prices in Kansas and Texas.
  • But clouding the outlook, boxed beef prices were choppy again this morning, with Choice cuts down 34 cents and Select cuts up 57 cents. Movement was decent at 98 loads. This follows choppy action yesterday and firmer prices to start the week.
  • Sharp gains in the U.S. dollar index amid bailout concerns in Ireland are also limiting buying interest to short-covering. This has resulted in broad risk-aversion today.
  • Light pressure also stems from a slowdown in weekly beef export sales in recent weeks. Today's total of 9,700 MT was down 2,400 MT from the week prior.
  • Weakness in the corn market has helped feeder cattle future to pare early losses.

 

February lean hogs are slightly higher at midday while the rest of the market is posting slight to moderate losses.

  • The market remains concerned about recent sharp declines in the pork cutout value, which have pulled packer profit margins deep into the red.
  • Packers are reducing kill hours and keeping bids steady to lower, though a few short-bought packers have been forced to raise bids.
  • The February contract continues to benefit from the steep discount it holds to the cash hog index with a week remaining until expiration. The April contract holds an even steeper discount to the index.
  • The rest of the market is seeing some technical selling as most contracts have seen major chart damage this week.
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