Market Snapshot, Noon CT (VIP) -- March 18, 2014

March 18, 2014 06:56 AM
 

Corn futures have extended early gains to trade 3 to 6 cents higher ahead of midday, with old-crop contracts leading to the upside.

  • Attitudes are bullish across the commodity sector today, amid escalating tensions regarding Ukraine and Russia.
  • Traders continue to speculate this could eventually disrupt grain shipments out of Ukraine and there are already indications the situation could result in lower production this year.
  • Spillover from the soybean and wheat markets add support.
  • A few traders are also looking ahead to spring planting with some concern. The forecast for continued cold weather does not bode well for thawing frozen soils or a prompt start to fieldwork or planting.
  • Gulf corn basis slid 1 to 2 cents for most delivery months at midday, signaling improved river transportation thanks to milder temps.

 

Old-crop soybeans are posting gains ranging from 11 to 23 cents, while new-crop futures are 6 to 8 cents higher.

  • Buying interest in the front-month accelerated as it moved above key resistance at $14.00. The May contract trimmed early gains as traders were a bit disappointed the front-month contract couldn't rally harder on the move through $14.00.
  • The market is also seeing renewed bull spreading activity after a brief period of spread unwinding last week, as traders have been reminded of strong demand for U.S. soybeans and tight supplies this week.
  • For one, China's ministry of commerce upped its March soybean import forecast from 3.49 MMT to 5.25 MMT, signaling still strong demand from the nation.
  • Traders are also pointing to yesterday's NOPA crush report that came in slightly stronger than expected as evidence of solid domestic demand.
  • And major cancellations of Chinese purchases of U.S. soybeans have yet to materialize. Its only significant cancellations so far have been of South American supplies.
  • Meanwhile, South America continues to struggle to get its bean crop shipped in a timely fashion.
  • Gulf basis was a mixed bag at midday, with immediate delivery steady, April and May delivery down 1 to 2 cents, respectively, and June delivery 2 cents higher.

 

Wheat futures are posting gains in the teens at midday. The HRW market continues to lead the charge with gains of 17 to 19 cents.

  • Ongoing uncertainty about the impact of Crimea's secession from Ukraine and tensions in the region are giving traders some incentive to build premium back into the market. While grain shipments have not yet been disrupted, this could change.
  • Ukraine's 2014 wheat production is expected to be reduced due to the unrest.
  • In anticipation of reduced competition from Ukraine, Russia's SovEcon raised its grain export forecast from 23.1 MMT to a range of 24.0 MMT to 24.4 MMT.
  • Support also stems from news Egypt, a value buyer, bought 175,000 MT of Russian, U.S. and Romanian wheat, signaling U.S. wheat prices are competitive globally.
  • In addition, state crop reports indicate ongoing deterioration in U.S. winter wheat country, with some states reporting notable declines. In Texas, the amount of wheat rated "poor" to "very poor" jumped to 52% the week ended March 16 versus 31% the previous week.

 

Live cattle futures are mixed with an upside bias. Feeder cattle futures remain under pressure at midday.

  • Choice and Select boxed beef cuts firmed $1.68 and $1.20, respectively, this morning, but the higher prices slowed movement to a measly 46 loads. Markedly slower movement indicates a top may be near.
  • In light of this, traders are displaying caution toward the long side of the market despite the fact nearby futures are at a discount to the cash market and early signs would typically point to higher cash cattle trade.
  • Feedlots will attempt to use record-high beef prices, tighter showlist estimates and now-profitable packer cutting margins to their advantage.
  • But since packers have been dealing with negative margins for quite some time, they will resist paying higher prices. Last week, trade took place mostly around $148 on the Southern Plains and at $150 to $152 in northern locations.
  • Daily slaughter to start the week was estimated up from week-ago but down from year-ago, reflecting improved demand among packers but also overall supply tightness this year.
  • Firmer corn prices continue to weigh on feeder cattle futures. April feeder cattle are slightly above the cash index.

 

Lean hog futures continue to post strong gains through the August contract, while later months are moderately lower.

  • Spring and summer-month futures remain supported by bullish technical and fundamental factors. Futures have hit yet another round of fresh contract highs today.
  • Highly bullish attitudes make few traders interested in betting on the short side of the market, despite the need for a correction according to the cash hog index and the Relative Strength Index.
  • Tight supplies due to the porcine epidemic diarrhea virus (PEDV) remain on traders' minds. Reminding of this, Monday's kill is down notably from week-ago and even more so from year-ago.
  • The pork cutout value firmed 39 cents this morning and movement improved to 120.82 loads. Pork is still a value relative to beef.
  • Packers are again paying steady to higher prices for market-ready hogs. The cash hog index was most recently projected $2.00 higher to $114.53 -- roughly $9 below the April lean hog contract.
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