Market Snapshot, Noon CT (VIP) -- February 8, 2013

February 8, 2013 06:18 AM

Corn futures softened following USDA's reports, but have moved off session lows. Nearby futures have since firmed, with the rest of the market down mostly 1 to 2 cents.

  • The February Supply & Demand Report favored market bears as USDA raised carryover more than expected to 632 million bu. due to a 50 million bu. cut to its export forecast, that was partially offset by a 20-million-bu. increase in estimated Food, Seed & Industrial use.
  • As expected, USDA trimmed its Argentine corn production estimate to 27 MMT and raised its Brazil corn estimate more than anticipated to 72.5 MMT.
  • USDA pegged world carryover about as expected at 118.04 MMT, which is up from its January projection of 115.99 MMT, but well below 131.01 MMT last year.
  • The fact that domestic supplies are still well below year-ago and at very low levels is limiting selling interest.
  • Also reflecting this was firmer Gulf corn basis for near-term delivery this morning. Basis was steady at midday.

Soybean futures have softened to trade 15 to 21 cents lower on record Brazilian bean supplies.

  • Traders are taking a sell the fact reaction to USDA's larger than expected cut to U.S. carryover. USDA cut soybean carryover 10 million bu. from last month to 125 million bu., whereas pre-report expectations were for just a 6 million bu.
  • The market was disappointed by USDA's decision not to up its export projection, as the cut to carryover came via an increase to crush. This reminds traders Brazilian supplies will soon hit the export market, reducing demand for U.S. beans.
  • USDA raised its Brazil soybean production estimate by 1 MMT to 83.5 MMT, which was offset by a 1 MMT to its Argentine bean production estimate.
  • But firmer Gulf basis this morning signals more export demand news may be in the near-future.

Wheat futures are favoring a firmer tone in mixed trade at all three exchanges.

  • USDA trimmed U.S. 2012-13 carryover more than expected to 691 million bu., which is helping to shore up some support for wheat futures.
  • USDA now puts the national average on-farm cash price at $7.70 to $8.10, tightening the range by a dime from last month, but leaving the mid-point of the range unchanged.
  • But limiting buying is a slight increase to global carryover from last month to 176.73 MMT, although this is below last year's 196.54 MMT figure.
  • Light support also comes from news India's 2012-13 wheat crop is expected to slide 2.7% to 92.3 MMT after a record crop the previous year. Countering this is the country's preparation to up its wheat exports.

Live cattle futures have softened to slightly to moderately lower trade. Feeder cattle futures are moderately to sharply lower with deferred months facing the heaviest pressure.

  • Cash cattle trade is reportedly getting started at $125 in Texas and Nebraska ahead of midday. This is steady with the bulk of last week's trade on the Southern Plains, but below nearby futures prices.
  • Showlist estimates are slightly higher this week and the boxed beef market has been choppy to higher this week. Considering negative packer profit margins, this was enough to justify steady but not higher bids.
  • Plus, Choice boxed beef values fell $1.19 this morning while Select cuts fell $1.06. Movement was strong at 138 loads. This raises concerns the boxed beef market may not yet have put in a low.
  • Traders are also disappointed that USDA's Supply & Demand Report did not reflect improved exports of U.S. beef thanks to the Japan easing its beef import restriction.
  • USDA left its beef export forecast unchanged from last month but raised its production estimate by 290 million pounds.
  • Strength in the corn market and technical selling continue to weigh on feeder cattle futures.

Lean hog futures remain choppy at midday with nearbys favoring the downside.

  • Softer cash prices and recent declines in the pork market are weighing on lean hogs today.
  • Cash hog bids are steady to $2 lower today as packers are working to improve deeply negative profit margins. Some have also trimmed kill hours to improve their bottom line.
  • These were largely the result of steep declines in the pork cutout value this week.
  • Adding to the negative tone, In his morning's WASDE report, USDA raised its 2013 pork production forecast by 140 million lbs. and lowered its export forecast by 30 million lbs. from last month.
  • Pressure on nearby contracts is being limited by the steep discount they hold to the cash hog index.
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