Market Snapshot, Noon CT (VIP) -- March 7, 2013

March 7, 2013 06:03 AM
 

Corn futures have softened to post losses of 2 to 5 cents in most contracts.

  • Softer river and Gulf basis levels have caused the corn market to weaken as it signals increased farmer selling and/or slower export demand.
  • This morning's Weekly Export Sales Report also reminded traders of limited export demand as USDA reported net sales reductions of 49,800 MT for 2012-13 and sales of 206,500 MT for 2013-14 the week ended Feb. 28. The net tally was well below expectations.
  • Traders are also reducing risk ahead of USDA's Supply & Demand Report tomorrow, which is expected to reflect a 17-million-bu. increase in carryover from last month due to softer export and domestic feed demand.

 

Soybeans are seeing some bull spreading activity today. Old-crop beans are 2 to 13 cents higher, while new-crop beans are posting slight losses.

  • Traders are adding some long positions in old-crop beans after this morning's highly impressive weekly export sales of of 392,000 MT for 2012-13 and 990,600 MT for 2013-14, which reminded the market of strong demand.
  • Traders expect USDA to remind the market of very tight carryover supplies tomorrow in its Supply & Demand Report.
  • Adding to concerns about tight supplies, Gulf basis surged 12 cents for immediate shipment this morning, though this is countered by sharply lower Mississippi River bids today.
  • Brazil's Conab cut its soybean production forecast by 1.3 MMT from last month to 82.1 MMT. This still represents a record-large bean crop, however.
  • Traders anticipate the large crop will soon hit the market. This along with recently improved soil moisture in the Midwest is weighing on new-crop beans.
  • Much more precip is needed to relieve the drought footprint in this region, however.

 

Wheat futures have trimmed gains to trade fractionally to a penny higher in Chicago, roughly 1 to 3 cents higher in Kansas City and 2 to 4 cents higher in Minneapolis.

  • Wheat futures pared gains as corn softened.
  • But weakness in the dollar index and strong weekly export sales of 618,100 MT for 2012-13 and 210,000 MT for 2013-14 are giving bulls a slight advantage.
  • Plus, this morning's drought monitor reflected much more rain is needed to relieve drought in winter wheat country. Forecasters have scaled back near-term and extended precip forecasts for the region.
  • Expectations USDA will raise wheat carryover from 691 million bu. to 713 million bu. tomorrow is limiting gains, however.
  • Also, India approved an additional 5 MMT of wheat for export, as expected. This is in addition to the 4.5 MMT already approved for export, which means U.S. wheat will face more export competition going forward.

 

Live cattle futures have improved to post slight to moderate gains in most contracts. Feeder cattle futures are now enjoying moderate gains.

  • Live and feeder cattle futures have benefited from corrective short-covering amid dollar weakness and ideas the downside has been overdone. Spillover from lean hog futures is also supportive.
  • Light to moderate cash cattle trade took place yesterday at mostly $128, which was steady with the week prior. Efforts to build the mild premium the front-month contract holds to these prices signals traders anticipate any additional sales will be at higher prices.
  • This assumption stems from a surge in boxed beef values this week. This morning, Choice cuts firmed 69 cents and Select rose 54 cents. Movement stayed light at 84 loads.
  • Beef strength has helped pull packer profit margins into the black for the first time in six months this week, which could increase their willingness to pay up for cash cattle.
  • Also, weekly export beef sales of 15,400 MT for the week ended Feb. 28 were a marked improvement from sales of 3,900 MT the week prior.
  • Weakness in the corn market is also giving feeder cattle a boost.

 

Lean hog futures have extended early gains to trade sharply higher across the board, with nearby contracts leading to the upside with $2-plus to nearly $3 gains.

  • Traders are actively working to correct the market's oversold condition, bolstered by weakness in the U.S. dollar index. Early gains have triggered buy stops.
  • Traders expect the pork market to soon put in a low as retailer ham buying for Easter followed by spring grilling should help stabilize the pork market. Strong pork movement of late is encouraging of this idea.
  • But until that coincides with higher pork prices, upside potential is likely limited to short-covering. Yesterday, the pork cutout value slid 47 cents. Recent declines have pulled packer profit margins into the red.
  • Nevertheless, packers are paying steady to higher prices for cash hogs today as some are ramping up production schedules and buying additional loads for next week.
  • Also, the cash hog index ticked up for the first time in an extended period today, signaling the spot market may also be working on a low.
     
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