Market Snapshot, Noon CT (VIP) -- March 13, 2013

March 13, 2013 07:01 AM
 

Corn futures have pared early losses to trade 3 to 5 cents lower in most contracts.

  • Dollar strength and a generally weak export market is encouraging profit-taking in corn futures today. Spillover from soybeans is adding pressure.
  • USDA's daily sales announcement of a 114,300 MT sale of grain sorghum for 2012-13 to unknown destinations signals end-users are increasingly seeking less expensive alternatives to U.S. corn. This adds to demand concerns.
  • In addition, U.S. ethanol production fell 1% last week to 797,000 barrels per day. Ethanol stocks declined 3.4% to 18.7 million barrels.
  • Plus, forecasts for large 2013-14 corn crop is weighing on new-crop corn.

 

Soybean futures have softened to trade mostly 20-plus cents lower in old-crop contracts and 8 to 10 cents lower in new-crop months.

  • Traders continue to unwind bull spreads amid concerns export demand for U.S. soy will soon fade. Dollar strength is also encouraging of profit-taking.
  • Traders are also unwinding long soybean/short corn spreads again today.
  • South American supplies are expected to hit the export market soon, easing U.S. soybean demand. A 5-cent decline in Gulf basis for immediate delivery this morning and at midday adds to ideas this may be starting.
  • Also, recent precip is seen as improving prospects for a rebound in production for the 2013-14 marketing year.
  • Traders are ignoring news the USDA ag attaché in Beijing expects China's 2013-14 soybean imports to rise 4% to 65.5 in 2013-14 on strong crush demand and declining production in the country. Chinese demand for U.S. soy is known.

 

Wheat futures have reversed course to trade roughly 3 to 5 cents higher in Chicago and Kansas City and mixed in Minneapolis.

  • Wheat futures have displayed impressive resilience in the face of heavy spillover pressure from soybeans as well as losses in corn.
  • Traders in nearby Chicago wheat contracts are working to correct these contracts' spread with nearby corn futures.
  • Traders are also hesitant to sell wheat in light of recent signs U.S. prices are competitive on the global export market.
  • But news Ukraine's grain crop is expected to recover to 55 MMT this year and that Canadian officials are looking to increase exports into the Southeast Asian market is limiting buying interest to short-covering.
  • In addition, India is in talks with Egypt about being added to Egypt's state-owned grain buying agency's list of wheat suppliers. Record Indian harvests have resulted in overflowing stockpiles.

 

Live cattle futures continue to enjoy moderate gains in the front-month while deferred contracts are slightly higher. Feeder cattle futures are moderately higher.

  • Live cattle traders are mildly favoring the upside as they wait for cash cattle trade to begin thanks to strength in the boxed beef market again this week.
  • This morning, Choice boxed beef values firmed 67 cents and Select values held steady. Perhaps more noteworthy, however, was improvement in movement to 100 loads.
  • This along with steady showlist estimates and positive packer profit margins could result in cash trade above last week's $128.
  • But this expectations is already factored into nearby live cattle contracts.
  • Dollar strength is also keeping bullish enthusiasm in check.
  • Weakness in the corn market is encouraging short-covering in feeder cattle futures, as is ideas the downside has been overdone.

 

Lean hog futures remain split, with the front-month slightly higher and deferred months posting slight to moderate losses.

  • The pork market's struggle to put in a low continues to limit buying interest in lean hog futures, as does strength in the dollar.
  • But traders remain optimistic that demand will soon pick up as per the seasonal trend, supporting the front-month contract. Yesterday's pickup in movement that was followed by solid movement this morning are encouraging of this idea.
  • Thus, they are unconcerned about narrowing the $4-plus premium the April contract holds to the cash index.
  • A few unexpected firmer cash hog bids are also limiting pressure, though most packers are paying steady prices as their margins are now just above breakeven.
  • Also, average hog weights in Iowa and southern Minnesota rose 0.8 lb. last week.
  • China's National Development and Reform Commission has says it may take measures to prevent further declines in cash hog prices, which recently fell below breakeven. This may include stockpiling pork for state reserves and encouraging producers to trim production.
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