Market Snapshot, Noon CT (VIP) -- November 8, 2012

November 8, 2012 05:58 AM
 

Corn futures have not strayed far from unchanged today and most contracts are currently around 2 cents lower.

  • Traders continue to put the final touches on positions ahead of tomorrow morning's USDA reports. It is expected to hold something for both bulls and bears. USDA is expected to reduce its production estimate but raise its carryover projection.
  • This morning's Weekly Export Sales Report showed corn sales of 157,600 MT for 2012-13 and 51,800 MT for 2013-14. While this met expectations and was an improvement over last week, it still represents lackluster demand.
  • This morning USDA announced Japan bought 152,400 MT of corn for 2013-14.
  • And Gulf basis levels signal more buys may be on the horizon. They firmed 3 cents for immediate shipment at midday and were steady to a penny higher for other months. Gulf basis was also steady to firmer this morning.

 

Soybean futures have softened to post losses of 4 to 9 cents through the May contract; Deferred months are mixed.

  • Traders are removing some risk ahead of USDA's reports tomorrow. Traders expect USDA to raise both its production and carryover estimates slightly from October.
  • This morning's Weekly Export Sales Report adds to the negative tone as sales of 186,400 MT for 2012-13 and 5,500 MT for 2013-14 fell well short of expectations.
  • Also, Brazil's Conab still expects record large production between 80.1 MMT and 83 MMT. A more favorable forecast for rain in northern production regions of the country improves crop prospects.
  • But pressure is being limited by news demand for Chinese soybean reserves is still weak, signaling the country's appetite for U.S. beans remains strong.

 

Wheat futures are enjoying slight gains at all three locations, with Kansas City as the upside leader.

  • Global production concerns are supporting wheat futures.
  • News the Food and Agriculture Organization of the United Nations has lowered its 2012-13 global wheat crop projection by 2.8 MMT from last month to 661.2 MMT reminded the market of tightening world wheat stocks.
  • Flooding in Australia is another area of concern.
  • The U.S. winter wheat crop is suffering from dryness in the Central and Southern Plains.
  • But gains will be limited until the market sees signs export demand for U.S. wheat is improving. Today's weekly export sales of 209,400 MT for 2012-13 and 11,500 MT for 2013-14 does not fit the bill and it fell short of exceptions.
  • Traders are also readying for tomorrow's USDA reports. Expectations are for USDA to raise its carryover estimate by 12 million bu. to 666 million bushels.

 

Live and feeder cattle futures are favoring a firmer tone in mixed trade.

  • Traders are engaging in some light short-covering as they wait for cash cattle trade to get underway in earnest. Some very light sales took place in Nebraska at $124 to $125 today, down $1 to $2 from last week, but trade has yet to begin elsewhere. Packers in Kansas have raised bids to $125, but feedlots continue to pass on those prices.
  • The market is also benefiting from news Japan's Ministry of Health, Labor and Welfare has decided to relax the rules to allow beef from cattle under 30 months and hopes to implement the new rules by year-end.
  • This morning's strong weekly beef export sales tally is also supportive.
  • But buying interest is being kept in check by softer boxed beef prices this morning. Choice cuts slid 17 cents and Select cuts fell 48 cents, though movement was strong at 123 loads.
  • Feeder cattle futures are benefiting from light spillover support from live cattle and softer corn prices, though a firmer U.S. dollar index is limiting gains.

 

Lean hog futures are still choppy at midday.

  • Traders are taking a step back and reevaluating positions after yesterday's rally now that the front-month contract is just a few bucks below the cash hog index.
  • While the cash hog market is mostly steady amid limited demand and ample supplies, the pork cutout value rose another 67 cents yesterday, strengthening packer profit margins.
  • Positive packer profit margins will continue to limit the market's downside risk as it gives them incentive to pursue an aggressive slaughter pace.
  • But the market's upside potential is also limited as demand typically softens ahead of Thanksgiving and some plants will be closed for Veteran's Day Monday.
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