Market Snapshot, Noon CT (VIP) -- July 17, 2013

July 17, 2013 07:10 AM
 

Corn futures are down 5 to 7 cents and are trading near their lows of the day.

  • Selling pressure is increasing as traders react to a shift to favorably wetter forecasts for both this weekend and for the 6- to 10-day outlook from the European model.
  • The shift to more precipitation in the forecasts is offsetting the concern caused by Monday's Crop Condition Report, which caught traders by surprise when it indicated deterioration of the corn crop.
  • Weekly ethanol production the week ending July 12 of 876,000 barrels per day (bpd) was down 5,000 bpd from the week prior.
  • A 5-cent slide in Gulf basis for immediate and early August delivery this morning was followed by a 20-cent drop for immediate delivery and a 10-cent decline for last-half July delivery in late morning trading. There is also a 3-cent decline in September delivery. This signals slower demand.
  • Strength in the U.S. dollar index is also adding to the negative tone.

 

Soybean futures are posting losses of 2 to 6 cents in new-crop contracts while the August is 2 cents higher.

  • The shift to a favorably wetter forecast for the Corn Belt for this weekend and into next week is pressuring soybean futures.
  • However, trader concern over the very delayed western Corn Belt crop is offsetting some of the selling pressure.
  • News of another daily soybean sale amounting to 165,000 MT of new-crop U.S. soybeans to China is viewed as supportive as it reminds traders that lower prices stimulate demand..
  • News China's foreign direct investment surged 20.12% over year-ago last month eases concerns about a slowdown in the nation's economy. Also supportive the commerce ministry's statement that it will soon introduce measures to support exports and imports.
  • Gulf basis at midday is unchanged from early trade.

 

Wheat futures continue to see choppy trade at all three locations, with Kansas City contracts favoring the upside and Chicago and Minneapolis mixed to weaker.

  • Light short-covering continues today but buying interest is easing as weakness in corn futures builds.
  • The wheat market is waiting for a fresh round of export sales news to rally.
  • Supporting the market is news from industry sources indicating China may import up to 10 MMT of wheat for 2013-14 as roughly 20 MMT of this year's crop is expected to be downgraded to feed wheat. But trade sources report China is reportedly pricing at least 500,000 MT of Australian milling wheat.
  • Gulf basis is 2 cents stronger for July delivery at midday.

 

Live cattle futures are moderately lower in most contracts. Feeder cattle futures are also moderately lower.

  • Further weakness in boxed beef trade is pressuring futures after a mixed start.
  • Otherwise, traders are reluctant to push prices confidently in either direction as they wait for direction from the cash market. Futures remain at a $3-plus premium to the cash index.
  • A few additional sales took place in Iowa yesterday following light trade at steady prices there on Monday. But late-week trade is expected elsewhere.
  • Choice boxed beef fell $1.04 and Select slipped 39 cents this morning. But movement is positive at 169 loads for the morning.
  • Traders will start to look ahead to this Friday's Cattle on Feed Report, which is expected to reflect tight supplies, as all categories are expected to come in below year-ago levels.
  • Feeder cattle futures are lower on the weakness in live cattle futures and the stronger dollar.

 

Lean hog futures are generally weaker with some bull spread unwinding lifting the April and December contracts slightly, while August is down 30 cents and October is off 15 cents.

  • Traders are evening positions as they wait for clear direction from the cash market.
  • Supporting the market is news the pork cutout value rose 52 cents today and movement is a strong 243.8 loads. That suggests demand may not be weakening as much as thought.
  • Cash hog bids are mostly steady, but traders are looking for some weaker bids as most packers are well supplied on near-term needs and thus are working to improve margins. But heat in the Midwest could make feedlots unwilling to transport market-ready hogs. This has resulted in a few higher bids.
  • The $6 discount of futures to the cash index limits trader interest in pressing futures lower currently.
  • Technical traders say it appears lean hog futures have put in a short-term low after Friday's island bottom, but the market is still awaiting confirmation.
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