Market Snapshot, Noon CT (VIP) -- January 4, 2013

January 4, 2013 05:58 AM
 

Corn futures have slightly extended early losses. Futures are now down 8 to 15 cents on spillover from soybeans.

  • Pitiful weekly corn export sales of 49,100 MT for the week ended Dec. 27 gave bears the early advantage in the corn market to wrap up the week.
  • The market extended early losses on news Informa Economics reportedly expects 2012 corn production of 10.8 billion bu. with a national average yield of 123.3 bu. per acre. This would be up from USDA's November crop production peg of 10.725 billion bu. and yield estimate of 122.3 bu. per acre.
  • Steady to lower Gulf basis levels today add to the negative tone, though basis levels at interior locations remain historically strong.
  • Strength in the U.S. dollar index today and chart damage this week is also giving traders incentive to book profits to wrap up the week, as well as spillover from stepped-up losses in soybean futures.
  • March corn futures have dropped below the 200-day moving average which lies at $6.84 1/4.

 

Soybean futures remain under pressure with futures seeing losses of mostly in the 20-plus-cent range.

  • Traders are focusing on removing risk to wrap up the week as they are worried that strong Chinese export demand for U.S. beans will fade as Brazilian supplies hit the market.
  • Weather in South America has generally been favorable and is expected to remain so. This increases the likelihood the region will produce a record-large bean crop.
  • Also, the market was reminded of upcoming USDA reports and the possibility it will raise its production estimates. Informa Economics reportedly estimates 2012 soybean production at 3.036 billion bu. with a national average yield of 40.1 bu. per acre. USDA in November estimated production at 2.971 billion bushels with an average yield of 39.3 bu. per acre.
  • Traders are ignoring a stronger-than-expected weekly export sales tally of 434,900 MT for the current marketing year and 61,400 MT for 2013-14.
  • Whether futures respect strong support at the November lows will be key to near-term price direction. March soybeans matched the November low of $13.56 earlier today.

 

Wheat futures have extended early losses, with Chicago and Kansas City posting double-digit losses. Minneapolis is close behind.

  • Spillover pressure from corn and soybeans is adding to pressure in the wheat pit, with additional pressure coming from negative outside markets.
  • This morning's weekly export sales data showed sales of 434,900 MT for the current marketing year, which came within traders' expectations. This helped to limit early losses, but focus has turned to position squaring.
  • Futures are also being pressured by improved moisture chances for the Central and Southern Plains. If reazlied, this precip could help drought areas, although much more precip will be needed.

 

Live cattle futures continue to see narrowly mixed trade at midday. Feeder cattle futures remains slightly to moderately higher.

  • February live cattle futures hit a new record high for the front-month contract this morning (monthly continuation chart). But this quickly gave way to some light profit-taking.
  • But buying interest is being limited by the fact that expectations for higher cash trade this week are more than factored into prices.
  • Beef strength this week supports expectations for higher cash cattle trade. This morning, however, boxed beef prices softened 9 cents and $1.13 for Choice and Select values, respectively. Movement was solid, however, at 113 loads.
  • Weekly beef export sales of 8,400 MT for 2012 and 1,300 MT for 2013 were down sharply from last week's total of 23,700 MT.
  • Feeder cattle futures continue to benefit from weakness in the corn market, though dollar strength is curbing bullish enthusiasm.

 

Lean hog futures remain slightly higher in nearby contracts, while deferred months are posting slight losses.

  • Funds are adding long positions in lean hogs to start the new year, encouraged by expectations for pork export and domestic demand to remains strong.
  • Yesterday, the product market saw a surge in both pork prices and movement. This gave packer profit margins a boost, though most are still cutting in the red.
  • Negative margins are encouraging packers to keep bids mostly steady today after paying steady to higher prices most of the week.
  • The cash hog index has been on the rise, but its gains have not kept pace with gains in the futures market. Thus, nearby contracts are at nearly a $4 premium to the index.
  • Dollar strength and losses in the Continuous Commodity Index and crude oil future are also limiting buying interest.
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