Market Snapshot, Noon CT (VIP) -- January 23, 2014

January 23, 2014 06:09 AM
 

Corn futures continue to trade 1 to 3 cents higher with nearbys leading gains.

  • Corn futures continue to trade higher on short-covering in reaction to steep losses in the U.S. dollar index.
  • Corn futures are also benefiting from spillover strength from strong gains in wheat futures along with higher prices in old-crop soybean futures.
  • Slight support is coming from forecasts for a return to hot and dry conditions for the Argentine corn crop. This follows a period of cooler temperatures and precip, however. Southern Brazil is also dealing with stressful conditions, though showers are expected this weekend for the region.
  • Offering support is news the U.S. weekly ethanol output rose 37,000 barrels per day (BPD) to 905,000 BPD. However, total weekly ethanol stocks rose 940,000 barrels to 17.02 million barrels.
  • Technical traders note today's action has March futures probing resistance at the January high of $4.35 1/2.
  • The trade is waiting for signs of rising export demand from tomorrow's weekly export sales report, which is delayed due to the federal holiday on Monday.
  • Gulf basis is steady as midday, continuing the trend seen much of the week.

 

Soybean futures have softened to trade 1 to 2 cents higher through the July contract, while deferred contracts are unchanged to 2 cents weaker.

  • Old-crop soybean futures are higher in mostly short-covering following yesterday's sharp losses and the decline in the U.S. dollar index.
  • Weakness in the U.S. dollar index and equity markets triggered by news China's manufacturing sector contracted for the first time in six months has traders somewhat nervous about new-crop futures. But the country has remained a strong buyer of U.S. soybeans through the recent decline in that nation's manufacturing sector.
  • Meanwhile lingering concerns China will eventually cancel some of its U.S. soybean orders when South American supplies come available is limiting buying interest.
  • Traders are starting to look forward to the release of weekly export sales totals tomorrow.
  • Gulf soybean basis is steady for immediate and March and later delivery periods but 10 cents lower for February delivery, which is giving traders pause.

 

Wheat futures continue to trade higher with most flavors generally 4 to 9 cents higher.

  • Wheat futures have backed off earlier gains but are still trading higher on the weaker U.S. dollar and rising weather concerns.
  • Today's sharp drop in the dollar adds to recent signs U.S. wheat prices are becoming competitive in the global market.
  • The lingering severe cold in some areas of the U.S. is starting to raise concern about winterkill in areas where snowcover is lacking. This includes parts of Nebraska, Illinois and northeast Missouri.
  • Taiwan and Japan bought U.S. wheat overnight, adding to ideas prices may finally be competitive.
  • Traders will receive an update on weekly exports tomorrow at 7:30 a.m. CT.
  • Gulf SRW and HRW wheat basis are unchanged at midday.

 

Live cattle futures are moderately to sharply lower, as are feeder cattle futures.

  • Live cattle futures are lower on a setback in wholesale beef prices and confirmation of another round of record-high cash cattle prices.
  • In addition, profit-taking is underway following the steep run-up in prices. Prices are marking an inside trading range as a result.
  • The wholesale market marked its first decline after a succession of record-setting highs today. Choice boxed beef is down $1.35 to $238.70 per cwt. while Select beef is down $1.43. Movement is a lackluster 71 loads.
  • Futures surged yesterday as the cash cattle trade got underway at mostly $147 in Kansas and Texas yesterday -- up $5 from last week's trade. Nebraska saw trade at a record $150. Now traders are "selling the fact" after "buying the rumor."
  • The losses in February futures are restrained compared to deferred contracts as it remains at a discount to the lower end of this week's cash trading.
  • Futures are also seeing weakness from yesterday's Cold Storage Report that showed frozen beef stocks at the end of December at 438.123 million lbs., which was roughly 13.3 million lbs. more than traders expected. However, this was still 27.6 million lbs. below year-ago.
  • Traders are also evening positions ahead of tomorrow's Cattle on Feed Report, which is expected to show ongoing supply tightening.
  • Strength in the corn market and the setback in live cattle futures are pressuring feeder cattle futures.

 

Lean hog futures have improved to choppy trade, with most contracts favoring the downside.

  • Lean hog futures are lower in reaction to a bearish Cold Storage Report along with spillover weakness from cattle futures.
  • Frozen pork stocks at the end of December came in at 557.130 million lbs., which was about 8.9 million lbs. more than traders expected. This was up 5.6 million lbs. from year-ago and 10.9 million lbs. above the month prior.
  • Adding pressure is the continuing slide in the pork cutout value, which dropped 68 cents in morning trading. Movement is a disappointing 178.48 loads.
  • Supporting futures is the reduced marketings prompted by extreme cold and icy roads in the Midwest. Cash bids are steady to higher this morning.
  • Some small packing plants in the eastern Corn Belt closed their doors Wednesday due to frigid temps. Thus, Saturday's kill is expected to be up 5,000 to 10,000 head from week-ago as plants look to make up for downtime this week and since the start of the year.
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