Market Snapshot, Noon CT (VIP) -- March 5, 2013

March 5, 2013 06:01 AM
 

Corn futures remain higher, with old-crop contracts leading gains amid bull spreading. March through July futures are 3 to 6 cents higher, with new-crop contracts mostly 1 to 3 cents higher.

  • Bull spreading continues to dominate the corn market, with old-crop contracts being supported by tight supplies and indications fresh demand news may be on the horizon.
  • Gulf corn basis is 2 cents higher for March shipment to stand 77 cents above May futures. Basis for all other months is now steady.
  • The recent boost in Gulf basis for immediate delivery suggests importers view corn as a value buy, but is also a reflection of tight supplies.
  • Meanwhile, buying in new-crop contracts is being limited as traders react to recent moisture improvements across the Corn Belt.
  • According to pre-report expectations, traders look for USDA to raise 2012-13 corn carryover by around 17 million bu. from last month to a still-tight 649 million bushels.

 

March through August soybean futures are 4 to 10 cents higher, with new-crop contracts 1 to 4 cents higher.

  • More proof the U.S. export window is open longer than usual is supporting old-crop soybean futures. This morning USDA announced a 330,000-MT old-crop soybean sale to an unknown destination.
  • Meanwhile, demand for new-crop soybeans has also ticked up recently. This morning USDA also announced China purchased 345,000 MT of soybeans for 2013-14.
  • Shipping delays at Brazilian ports are keeping end-users coming to the U.S. for now, but eventually the record Brazilian crop will hit the world market and demand for old-crop U.S. beans will soften.
  • Traders are also beginning to more actively even positions ahead of Friday's Supply & Demand Report, in which they expect USDA to trim carryover by around 3 million bu. from last month to 122 million bushels.

 

Wheat futures are fractionally to 4 cents higher on spillover support.

  • Wheat is seeing a boost from strength in neighboring markets, especially the corn market given the discount nearby Chicago contracts hold to old-crop corn futures.
  • History suggests the discount structure of wheat to corn should be short-lived, but wheat remains in a follower's role and is searching for demand.
  • Buying interest in wheat futures is being limited by recent moisture improvements across the Plains. Recent snowfall is melting as temps warm and southern areas of the region are in line for some rains late this week.
  • Also, ABARES says it expects Australian wheat production to increase 13% in 2013-14, but for Australian wheat exports to decline by 5% from this season. This signals more opportunities ahead for U.S. wheat exports.
  • Buying enthusiasm is also being limited by expectations USDA will raise carryover from last month by around 22 million bu. to 713 million bushels.

 

Live cattle futures have reversed course to trade slightly to moderately lower. Feeder cattle futures are now moderately to sharply lower.

  • Live cattle futures have slipped on concerns about beef demand. Traders are concerned demand will soften as consumers pull in spending due to uncertainties about how government cutbacks will impact consumer spending.
  • But the Dow Jones Industrial Average's move to a new high is helping to limit pressure on live cattle futures.
  • Meanwhile, boxed beef prices continue to climb, with Choice up $1.47 and Select up $2.53. Movement at 83 loads is concerning as it signals higher prices are being met with some resistance.
  • Packers have not yet begun bidding for animals and current expectations are they will need to come to the cash market sooner rather than later due to tight market-ready supplies caused by stressful feedlot conditions.
  • April live cattle futures are trading at a slight premium to last week's $128 cash cattle prices in the Plains. The contract has seen trade above resistance at yesterday's high and below support at yesterday's low, but is currently off the daily low.
  • Feeder cattle futures have turned sharp lower in reaction to strength in corn futures.

 

Lean hog futures are mixed, with the April through July contracts weaker and far-deferred contracts slightly firmer.

  • Lean hog futures were mostly firmer across the board earlier amid short-covering, but nearby contracts have weakened on concerns domestic pork demand will soften as consumers rein in spending.
  • The cash hog market is mixed this morning, with some locations raising bids due to a slowdown in marketings caused by winter weather. But most locations are offering steady bids as packers are not concerned about securing supplies.
  • April lean hog futures have done more technical chart damage, as the contract is closing in on contract-low support at $79.50.
     
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