Market Snapshot, Noon CT (VIP) -- January 2, 2013

January 2, 2013 06:02 AM
 

Corn futures have reversed early gains to trade roughly 9 to 10 cents lower through the March 2014 contract.

  • Corn futures softened as the dollar reversed early losses and futures failed to find sustained buying interest above psychological resistance at $7.00.
  • Spillover pressure from soybeans and wheat are also making it difficult for corn to find active buying interest.
  • In addition, steady Gulf basis levels remind traders of ongoing lackluster export demand.
  • Further complicating the demand situation, the Mississippi River is expected to close to barge traffic this week.

 

Soybean futures are now seeing losses in the mid- to upper teens after posting similar gains on the open this morning.

  • Heavy spillover pressure from soymeal is weighing on the soybean market.
  • Traders are unwinding long soymeal/short soyoil spreads as the fiscal cliff package included a biodiesel tax credit that will retroactively cover all of 2012 in addition to 2013. This will likely increase soyoil demand going forward.
  • In addition, the market is disappointed that beans were unable to sustain early gains spurred by bullish enthusiasm thanks to the fiscal cliff being avoided.
  • Traders are aware that harvest is getting started for early-planted beans in South America. This means these beans will soon compete against U.S. supplies for export business.
  • China has recently canceled large U.S. soybean buys in anticipation of lower-priced Brazilian beans soon becoming available.

 

Wheat futures have softened to losses in the teens to 20-plus cents in Chicago and Kansas City. Minneapolis wheat is seeing losses in the upper teens.

  • Early gains in the wheat market triggered light profit-taking which then triggered sell stops as futures moved through key technical levels of support at last week's multi-month lows.
  • While there have been some signs U.S. wheat prices are attracting value buying, the market needs solid proof U.S. prices are competitive on the global market.
  • Adding to demand concerns, India is expected to export 2.5 MMT of government wheat stocks due to surplus reserves over the next five to six months.
  • Also, winter wheat conditions have improved slightly in the Central Plains, though conditions elsewhere continue to deteriorate.
  • A now-firmer U.S. dollar index is adding light pressure.

 

Live cattle futures have softened to post slight losses in nearby contracts, while deferred months are mostly slightly higher. Feeder cattle futures are also mixed.

  • The boxed beef market softened this morning. Choice boxes slid 14 cents and movement slowed notably to just 62 loads, though Select cuts rose $1.40. This calls into question expectations for higher cash trade this week.
  • Tighter showlist estimates this week should help feedlots secure at least steady prices, however. Trade last week took place at mostly $127 in the Southern Plains.
  • But buying interest is being limited by the fact nearby contracts are already at at least a $5 premium to last week's cash prices.
  • The U.S. dollar index's move into positive territory is also encouraging light profit-taking in live and feeder cattle futures.

 

February lean hogs are under light pressure, while deferred months are slightly to moderately higher.

  • The front-month lean hog contract continues to face pressure due to last Friday's Quarterly Hogs & Pigs Report that showed All Hogs & Pigs at 100% of year-ago levels, whereas traders had expected a smaller inventory relative to year-ago.
  • Plus, average hog weights are on the rise. Average hog weights in Southern Minnesota and Iowa rose 2.2 lbs. the week ended Dec. 29.
  • But packers are paying steady to firmer prices for market-ready hogs as they are thought to be short-bought on near-term needs after holiday downtime.
  • Improvement in the pork cutout value Monday is also providing light support to deferred contracts as is relief that lawmakers avoided the fiscal cliff.
     
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