Market Snapshot, Noon CT (VIP) -- July 30, 2013

July 30, 2013 07:07 AM
 

Corn futures have pared early gains to trade around 1 to 2 cents higher in most contracts.

  • Corn futures continue to enjoy corrective short-covering at midday but the upside is limited to mild corrective buying.
  • Yesterday's crop condition rating reflected some stabilization in the corn crop as USDA rated 63% of the crop "good" to "excellent," which was unchanged from week ago.
  • The weighted Pro Farmer Crop Condition Index (0 to 500 point scale) showed the corn crop dropped 1 point.
  • But gains are being limited to short-covering as the market views current and expected non-threatening weather as favorable for the pollinating corn crop.
  • Traders are showing little concern about lagging corn development. USDA data indicates 71% of the crop is silking (versus 75% for the five-year average) and 8% is in the dough phase (versus 17% on average).
  • Also encouraging some light short-covering is stabilization in basis levels at interior locations after last week's plunge.
  • South Korean feed makers continue to buy corn on the price drop, but the Black Sea region remains the origin of choice due to lower prices than U.S. supplies. South Korea bought another 50,000 MT of Black Sea origin corn overnight.
  • Gulf corn basis surged 15 cents for immediate delivery at midday, but it fell 5 to 10 cents for August delivery.

 

Soybean futures have softened to post double-digit losses across the board.

  • Early short-covering gains again gave way to selling, as what the market views as "favorable" weather makes it tough for bulls to gain any traction.
  • Soybeans were initially supported by an unexpected 1-percentage-point drop in the amount of the crop rated "good" to "excellent" to 63%. The weighted Pro Farmer Crop Condition Index (0 to 500 point scale) also reflected a 1-point decline.
  • The market is not concerned about the slow development of the crop. Just 65% of beans are blooming and 20% of the crop is setting pods compared to 74% and 34%, respectively, for the five-year average pace.
  • Of note, the No. 1 bean producing state of Iowa has just 63% of the crop blooming, 20 points behind the average pace, and 14% of the bean crop setting pods, 29 percentage points behind the norm.
  • News of a sharp, 65-cent slide in Gulf basis for immediate delivery this morning is outweighing USDA's announcement of a daily sale of 290,000 MT of soybeans to an unknown destination for 2013-14.

 

Wheat futures have reined in early gains to trade 2 to 4 cents higher in most contracts for all three varieties.

  • Japan announced it is officially lifting its ban on U.S. western white wheat and U.S. soft white feed wheat. Japan's weekly tender included 89,579 MT of U.S. western white wheat, the first tender for that flavor since late May. This news is providing light support.
  • Global importers have also recently increased purchases on the price break, though the Black Sea region has been the recipient of much of the business.
  • For instance, the results of Egypt's tender show the country bought 240,000 MT of Romanian and Ukrainian wheat for September delivery. Overnight, Taiwan did purchase 97,200 MT of U.S. wheat.
  • Gulf basis firmed 2 to 8 cents for July to early September delivery this morning, signaling more demand news may be ahead.
  • Talk of reduced grain quality from this year's SRW crop as late-season rains caused some sprouting may support demand for high-quality SRW supplies, but it's not typically a good thing when overall crop quality is poorer.

 

Live and feeder cattle futures under pressure at midday.

  • Traders are reducing some of the premium nearby futures hold to last week's $119 trade in the Southern Plains. Northern locations saw trade at $120.50 to $122.00 last week, but this slowed demand.
  • Showlist estimates are sharply higher for Nebraska this week, while other locations held steady or rose just slightly. Packers have yet to place bids.
  • This plus an unimpressive start in the boxed beef market limits upside potential for cash trade this week, barring a change in the trend. This morning, Choice cuts firmed 2 cents while Select cuts fell 44 cents. Movement was light at 86 loads.
  • But the market remains on watch for a seasonal low in the cash and futures markets.
  • Mild gains in the corn market and weakness in live cattle is weighing on feeder cattle futures today. Traders are taking profits after recent gains.

 

Lean hog futures continue to post slight to sharp losses, with nearby contracts leading to the downside.

  • Weaker cash hog prices in the western Corn Belt yesterday and expectations for more of the same today caused futures to break key support and close the market's recent island top. This, in turn, triggered sell stops and active fund selling.
  • The October contract broke through the 200-day Moving Average Friday and the contract gapped below the 50-day Moving Average today.
  • Fundamentally, the cash hog market has seen some pressure as hog weights and kill numbers are expected to soon rise seasonally.
  • Traders are paying little attention to an uptick in the cash hog index the past two reporting periods or the fact that the August contract is more than $4 below the cash market or that the October contract is at nearly an $18 discount to the index.
  • Cash hog bids are mostly steady to lower today.
  • Traders are also ignoring recent improvement in the product market. This morning the pork cutout value firmed 53 cents, though movement was light at 135.4 loads.
     
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