Market Snapshot, Noon CT (VIP) -- January 16, 2013

January 16, 2013 06:06 AM
 

Corn futures remain choppy with March through July futures 3 to 4 cents lower and deferred months slightly higher.

  • Corn futures softened this morning after the release of data showing U.S. ethanol production slowed to 784,000 barrels per day (bpd) for the week ended Jan. 11, which was down 42,000 bpd from last week and the lowest figure since the Energy Information Administration began releasing weekly data in June 2010.
  • But pressure is being limited by strong gains in the soybean market and increasing concern about hot, dry conditions in Argentina.
  • As USDA last week showed U.S. corn supplies are even tighter than expected, South American production takes on more importance this year.
  • Pressure also stems from concern about ongoing weak export demand. Emphasizing this, Gulf basis levels at midday declined 1 to 6 cents for January, February and March delivery. Other months held steady.

 

Soybean futures continue to enjoy gains of 10 to 16 cents with nearbys leading gains.

  • Developing heat and dryness in Argentina continues to support the soybean market as a bumper crop is needed to ease the tight supply situation created by the U.S. bean crop shortfall.
  • But generally favorable growing conditions in Brazil mean South America is still expected to produce a record-large crop.
  • Support also stems from recent signs of value buying by exporters. At midday, Gulf basis firmed 5 cents for February delivery, signaling more daily sales announcements may lie ahead. Gulf basis was steady to 2 cents lower for other months.

 

At midday Chicago and Kansas City wheat are narrowly mixed, while Minneapolis wheat is fractionally to 2 cents higher.

  • Some light profit-taking occurred in the wheat market this morning after corn futures softened.
  • But that is the extent of selling interest thanks to production concerns in the U.S. and in the Former Soviet Union.
  • Drought encompasses much of winter wheat country, and the U.S. Central Plains recently saw temps dip below freezing for several days. This raises concern about the HRW crop that entered dormancy in tough shape.
  • Further, there were reports earlier this week that up to a quarter of the Russian wheat crop may have been damaged by winterkill.
  • On the other hand, India continues to export government wheat stocks. The country announced it plans to export 10 MMT of government reserves, which compares to earlier plans for 4.5 MMT to be exported.

 

Nearby live cattle futures have softened to post moderate to sharp losses while deferred months are slightly lower. Feeder cattle futures are moderately lower.

  • Some very light cash cattle trade took place at $125 in Texas this morning, which is down $1 from the bulk of sales there last week. This has pressured nearby futures as they are still at a $3-plus premium to those cash prices.
  • Lackluster boxed beef performance Monday and Tuesday and steady weekly showlist estimates led to the lower cash prices.
  • This morning the boxed beef market improved, however. Choice cuts firmed 32 cents and Select cuts rose $1.35. Movement was also solid at 117 loads.
  • Spillover from live cattle is keeping feeder cattle futures under pressure, though corn has softened to choppy trade.

 

Lean hog futures remain slightly higher through the June contract and slightly lower in deferred months.

  • Trading interest in the lean hog market is limited amid uncertainty about near-term cash and futures direction.
  • While packer profit margins remain in the red, some have had to raise bids to secure supplies for Saturday and early next week. Cash hog bids are mostly steady to firmer.
  • The pork cutout value did improve yesterday and movement was impressive, but in recent days, prices have fallen. Bulls continue to hope pork will benefit from the fact that it is "cheap" relative to beef.
  • Consistent improvement in the product market will be needed to pull packer cutting margins into the black, thus supporting the cash and futures markets.
  • The February contract is at just a slight premium to the cash hog index. This is also limiting buying interest.
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