Market Snapshot, Noon CT (VIP) -- July 9, 2013

July 9, 2013 07:08 AM
 

Corn futures have extended early gains to trade 13 to 19 cents higher.

  • Corn futures continue to benefit from signs of demand improvement on the recent price decline. Old-crop futures remain supported by tight supplies.
  • Strong basis gains this morning signal more demand news may lie ahead. Recent demand improvement signals prices have reached value levels.
  • New-crop corn is also benefiting from some technical buying as the December contract closed back above the $5.00 mark yesterday.
  • The forecast for above-normal temps the second half of July is adding support as much of the crop will be pollinating at that time. As of Sunday, just 6% of the corn crop was silking, versus 20% for the five-year average.
  • Spillover from wheat and soybeans in the face of dollar strength is also supportive.

 

Soybean futures have extended early gains to trade 18 cents higher in old-crop futures and 20-plus cents higher in new-crop.

  • Soybean futures are enjoying technical buying interest. Supply concerns propelled July soybeans above $16.00 yesterday and to another 2013 high today.
  • Meanwhile, the dip below $12.50 in new-crop futures last week spurred value buying as there is a lot of uncertainty about the 2013 bean crop given the very late planting date and slow development.
  • Ninety-five percent of the bean crop is emerged (97%) and just 10% of the crop is blooming, compared to 24% on average.
  • And while rains in the western Corn Belt today are beneficial, the extended forecast for above-normal temps is concerning.
  • Gulf basis firmed 5 to 10 cents this morning for July and September delivery, respectively. Basis firmed another penny for July delivery at midday. This signals end-users are taking advantage of last week's price slide in new-crop futures to book needs and that supplies are tight.
  • The market is also seeing some short-covering ahead of USDA's Supply & Demand Report Thursday.

 

Wheat futures are enjoying gains in the teens in Chicago and Kansas City. Minneapolis is 9 to 11 cents higher in most contracts.

  • Wheat continues to benefit from recent export sales announcements to China that have totaled more than 1.3 MMT of SRW wheat.
  • Also, harvest-related hedge pressure has eased now that more than half the crop is cut. But technically speaking, the market has a way to go to confirm a seasonal low is in place.
  • Wheat is also benefiting from short-covering amid ideas the downside has been overdone, especially considering tight old-crop corn supplies and 2013 crop uncertainties.
  • Minneapolis wheat is benefiting from concerns about the slow development of the spring wheat crop. It is 45% headed, compared to 53% on average and 85% last year.
  • But somewhat offsetting this is a 4-point increase in the amount of the crop rated "good" to "excellent" to 72%.

 

Live cattle futures have improved to trade slightly higher in the August and October contracts and slightly lower in deferred contracts. Feeder cattle futures have pared early losses.

  • Early pressure has given way to some light short-covering as the market remains on watch for a market bottom in the product and cash markets.
  • While Choice boxed beef prices fell 40 cents this morning, Select firmed 57 cents and movement improved to 102 loads.
  • Plus poor pasture and range conditions in the Southern Plains and heat in northern locations today are keeping tight supplies in focus.
  • But futures are already several dollars above last week's $119 cash trade in the Southern Plains, which leaves them vulnerable to some profit-taking.
  • Strength in the corn market is encouraging traders to narrow feeder cattle futures' premium to the cash index.

 

Lean hog futures have improved to post slight gains in all but the August contract, which is slightly lower.

  • July lean hogs remain at a $2-plus premium to the cash hog index, which is providing light support. The soon-to-be front-month August contract is at more than an $8 discount to the index, which is also limiting selling interest.
  • Also, news that Purdue University economist Chris Hurt anticipates a record-large drop in the production costs for hogs by the fourth quarter of the year compared to the second quarter is also giving the market a lift.
  • But countering this are expectations demand will falter with the July Fourth holiday in the past and the hottest days of summer approaching.
  • In line with this train of thought, the pork cutout value slid 74 cents on light movement of 143.2 loads this morning.
  • Confirmation of a market top could spur a steep selloff as speculators have acquired a large net long position.
  • Cash hog bids are steady to lower today amid varied demand. Some plants are thought to be full, making supplies more readily available for others. But hot, humid Midwest temps are making some producers reluctant to market hogs.
     
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