Market Snapshot, Noon CT (VIP) -- January 21, 2014

January 21, 2014 05:55 AM
 

Corn futures remain under pressure, with most contracts fractionally to 2 cents lower.

  • The forecast for cooler temps and rain in key production areas of Argentina is giving bears an edge to start the week. Brazil is also expected to receive timely rains.
  • Also giving market bears the advantage is ongoing concern about China's reluctance to approve the Syngenta Agrisure Viptera variety that has resulted in U.S. corn and DDG shipment rejections.
  • Heavy spillover from the soybean market adds to the negative tone.
  • The market was able to slightly trim gains after weekly corn export inspections of 29.811 million bu. topped expectations and rose nearly 9 million bu. from the week prior.
  • Gulf corn basis held steady this morning and at midday, signaling demand and supply are well balanced.

 

The front-month soybean contract is posting losses around 30 cents while deferred contracts are seeing losses in the teens to 20s.

  • Recent and expected rains and cooler temps for Argentina are weighing heavily on the bean market to start the trading week.
  • Early pressure and the move through psychological support at $13.00 for nearby contracts triggered sell stops.
  • Traders are also concerned about the spread of H7N9 bird flu in China, especially with the Lunar New Year celebration around the corner. This could eventually translate to lower feed demand.
  • This morning's Weekly Export Inspections Report did not reflect any such slowdown, however. Soybean export inspections of 56.591 million bu. met expectations and helped advance the pace of inspections to 14.5% ahead of year-ago. USDA forecasts exports will surpass the 2012-13 marketing season by 13.3%.
  • The market is also digesting news China's government will end its stockpiling program for soybeans in 2014 in favor on direct subsidies to farmers. This news was expected, but signals China will continue to rely heavily on imports to meet its soybean needs.

 

Wheat futures remain narrowly mixed in the HRW market, while SRW and HRS wheat are firmer.

  • Ideas the downside has been overdone for the wheat market is encouraging some light short-covering. Some contracts remain oversold according to the Relative Strength Index.
  • The market is also benefiting from some spread unwinding with corn and beans.
  • Also, there is some concern about cold temps in the Plains as recent mild weather eroded protective snowcover.
  • Selling interest is also being limited by recent signs U.S. wheat prices have reached value levels.
  • But weekly wheat export inspections of 15.557 million bu. were disappointing, as the tally was down roughly 10 million bu. from the week prior and below expectations.

 

Live cattle futures are posting moderate to sharp gains in most contracts at midday. Feeder cattle futures are slightly to moderately higher in most contracts.

  • Live cattle futures are benefiting from efforts to bring futures in line with record-high cash prices of $142 to $144.50 last week. The front-month contract remains nearly $1 below the lower end of this range.
  • Traders have been hesitant to bring futures in line with the cash market in recent weeks due to uncertainty about the sustainability of lofty prices.
  • Adding to skepticism, showlist estimates are up overall this week, as gains in Nebraska, Colorado and Texas more than offset a slight decline in Kansas.
  • However, the surge in boxed beef prices continues. Choice cuts surged $3.01 and Select rose $2.57 this morning; both cuts are closing in on the $240 per cwt. level. Movement was light at 44 loads, however.
  • Softer corn prices are adding to the positive tone in feeder cattle futures.

 

Lean hog futures remain mixed at midday.

  • Cash hog bids are mostly steady with a few lower bids today. Winter weather and higher demand after a holiday closure Monday for some plants is preventing some packers from lowering bids.
  • Buying interest is also being tempered by the pork market's ongoing struggle to put in a seasonal low, despite the record-setting runup in the wholesale beef market.
  • This morning, the pork cutout value dropped $1.31 and movement failed to impress at 167.76 loads.
  • Spillover from strong gains in live cattle is helping to limit selling interest as well.
  • Pressure on the front-month contract also stems from the $6.00 premium it holds to the cash index.
     
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