Market Snapshot, Noon CT (VIP) -- January 31, 2014

January 31, 2014 06:06 AM
 

Corn futures have improved to narrowly mixed trade.

  • Traders in the corn market are engaging in month-end positioning today.
  • Both buying and selling interest remains limited in the market.
  • On one hand, the market has seen a demand base rebuilt by the dip in prices.
  • Reminding of this, Spain purchased another 110,000 MT of U.S., bringing its total buys this week to 220,000 MT for 2013-14 delivery.
  • In addition, Gulf basis firmed again for near-term delivery at midday, signaling more export demand news may be ahead.
  • But on the other hand, there is concern that if prices rise too far, value-buying will again slow.
  • In addition, supplies in the U.S. and South America are ample.
  • Dollar strength and a generally risk-off tone across the markets are also a source of pressure.

 

Soybean futures have strengthened to trade 6 to 8 cents higher through the July contract with deferred months up 1 to 3 cents.

  • Nearby contracts are leading gains thanks to some mild, month-end bull spreading.
  • The forecast for heat and dryness for much of Brazil is also providing support.
  • But the market's upside will likely be limited by expectations China will soon cancel its U.S. soybean buys as Brazilian soybeans will hit the market soon.
  • But potential Chinese order cancellations may now be considered baked into prices as the market has suspected this for some time. In fact, if order cancellations are smaller than expected, prices may even rise.
  • In addition, China has seen some economic headwinds of late and the H7N9 bird flu continues to spread. Meanwhile, export buys from China often slow during its Lunar New Year celebration, which kicks off today.
  • Buying in deferred contracts is being limited by news Cargill will idle a North Carolina soy crushing plant later this spring due to declining domestic demand. That also raises questions about possible imports from South America.

 

Wheat futures are mostly 2 to 4 cents higher across all three flavors at midday.

  • Ideas the downside has been overdone in the wheat market is encouraging some mild short-covering to wrap up the week and the month.
  • Also, much of the nation is expected to see another cold blast, though this is expected to be accompanied by some beneficial snow.
  • Yesterday's stronger-than-expected weekly export sales data is providing some support as traders look for signs U.S. wheat prices have reached "value-buy" status, but gains in the U.S. dollar index can quickly change that situation.
  • Improved corn prices are also making it easier for wheat to find some mild buying.

 

Live cattle futures remain narrowly mixed at midday as traders await active cash cattle trade and the biannual cattle inventory update. Feeder cattle futures are moderately higher.

  • The boxed beef market continued its steep slide this morning, with Choice boxed beef dipping $2.78 and Select down $1.21. Movement was also quite light at 55 loads.
  • Active cash cattle trade has not yet got underway, but expectations are for trade to take place at lower prices this week. Light tests of the market have occurred at $1 to $4 lower prices compared to action at $147 to $150 last week.
  • Traders are also readying for Cattle Inventory Report this afternoon. Pre-report expectations are for it show all cattle and calves at 98.6% of year-ago levels, the annual calf crop at 97.9% and beef replacement heifers at 103.1% of year-ago.
  • The market is largely ignoring news National Beef Packing Company (National Beef) today announced plans to close its beef processing facility located in Brawley, California due to a declining supply of fed cattle.
  • Softer corn prices are adding to the positive tone in feeders and month-end positioning are lifting feeder cattle. The technical posture of the market still favors market bulls.

 

Lean hog futures are slightly to moderately firmer in all but the front-month, which is slightly lower.

  • Ideas the pork and cash market will continue to improve going forward are supporting futures.
  • The pork market did set back this morning after improving throughout the week. The pork cutout value fell $1.72 and movement was light at 158.42 loads this morning.
  • Meanwhile, the cash hog market is mostly steady today as winter weather and cold temps slowed hog movement early this week, increasing packers' needs the latter half of the week.
  • The February contract is being pressured by the roughly $4 premium it holds to the cash hog index ahead of the calendar flip to its delivery month.
  • There is also some talk the spread of the porcine epidemic diarrhea virus (PEDV) could have been some of the reason for Cargill's decision to idle a North Carolina soy processing plant.
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