Market Snapshot, Noon CT (VIP) -- June 19, 2013

June 19, 2013 07:03 AM
 

Corn futures continue to enjoy gains around 6 to 9 cents with new-crop leading gains amid some bull spread unwinding.

  • Corn futures are enjoying followthrough buying after yesterday's technically significant gains. The July contract closed the wide April 1 gap yesterday and closed above the 100- day moving average for the first time since that date.
  • Informa Economics reportedly expects USDA to cut 2.02 million acres from its March estimate to 95.262 million acres due to the wet, cool spring.
  • Basis strength around the country and at the Gulf are indicative of tight old-crop supplies.
  • Traders are brushing off a slowdown in ethanol production last week to 873,000 barrels per day, down 11,000 barrels per day from the week prior.
  • While warmer temps are favorable for crop development, more rain is in the forecast for the upper Midwest this week. This keeps new-crop production uncertainty in mind.

 

Soybean futures are slightly higher in old-crop contracts, while new-crop futures are double-digit higher.

  • Spillover from corn and wheat are supporting the soybean market today.
  • Also, basis strength around the country signals tight supplies. These supply concerns are heightened by uncertainty about the 2013-14 growing season as planting is still taking place and what crop has been planted has been subject to excess precip.
  • Informa Economics reportedly expects USDA to raise its soybean acreage projection by 630,000 acres from March to 77.756 million acres as wet conditions caused some intended corn acres to be switched to beans. But this is already factored into prices.
  • Support also stems from news China National Grain and Oils Information Center sees the country's soybean imports rising to 6.9 MMT this month, up 1.8 MMT from May.
  • The U.S. ag attaché in China has trimmed the forecast for 2012-13 soybean imports by 3.5 MMT to 59.5 MMT and it raised its 2013-14 import forecast by 2 MMT to 67.5 MMT. USDA pegs old-crop imports to China at 59.0 MMT and new-crop at 69 MMT.
  • Gulf basis firmed 4 cents for immediate delivery this morning and another 2 cents at midday, signaling more demand news may be ahead.

 

Wheat futures are leading the rally in the grain and soy markets today, with Chicago and Kansas City posting gains in the mid- to upper-teens and Minneapolis 11 to 14 cents higher.

  • Wheat futures are enjoying some technical-based buying. Nearby Chicago wheat futures moved back above the psychological $7.00 level.
  • There is also some speculation that poor harvest results could be lifting futures.
  • Informa Economics reportedly expects USDA to peg spring wheat acreage at 11.791 million acres on June 28, which would be down 910,000 acres from its March projection.
  • This, along with concerns about slow spring wheat development, are supporting Minneapolis wheat.

 

Live cattle futures are enjoying moderate to sharp gains. Feeder cattle futures are moderately higher at midday.

  • Spillover from lean hogs is encouraging light short-covering as traders wait for cash cattle trade to pick up. Nearby contracts' move above the $120 mark has encouraged some technical buys.
  • Considering heavier showlist estimates this week, packers will likely be unwilling to raise bids, but futures are trading in line with last week's mostly $120 trade on the Southern Plains.
  • This morning Choice boxed beef cuts fell $1.46 to dip below the $200 per cwt. mark to $198.78. Select cuts also fell 11 cents, but the softer prices encouraged strong movement of 139 loads.
  • Traders are also beginning to look ahead to Friday's Cattle on Feed Report, which is expected to show all categories below year-ago with Placements expected to come in at 95.9% of year-ago levels.

 

Lean hog futures gapped higher on the open and are enjoying moderate to sharp gains, with nearby contracts leading the charge.

  • Rising cash prices on tightening supplies and gains in the product market continue to propel lean hog futures. Early gains triggered buy stops.
  • The pork cutout value surged another $1.98 this morning, but even more impressive is movement of 268.8 loads.
  • Nearby contracts are still at a $3-plus discount to the climbing cash hog index.
  • Concerns about the spread of the PEDV virus is an underlying source of support, as this could further tighten supplies.
  • Traders are not overly concerned about expectations for Friday's Cold Storage Report to reflect frozen pork supplies near 663 million lbs., down 5.1% from last month but 18.6% above the five-year average. Large stocks have been the norm this year.
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