Market Snapshot, Noon CT (VIP) -- October 17, 2012

October 17, 2012 07:02 AM
 

 

Corn futures are 3 to 4 cents higher through the September contract, while deferred months are posting lighter gains.

  • There's little fresh news for the market to digest. As a result, traders are engaging in some light short-covering amid dollar weakness and are reevaluating the relationship of supply and demand at current prices.
  • Supplies are undoubtedly tight. But the fact that high prices have trimmed demand is also indisputable. The question remains whether this demand destruction is short-term or long-term in nature.
  • Today, a senior official from South Korea's largest feed miller said the company has needs secured through February 2013, enabling it to hold off on making corn purchased in hopes of lower corn prices.

 

Soybean futures are 5 to 8 cents higher on help from dollar weakness.

  • Sharp weakness in the U.S. dollar index due to some positive signs in the euro-zone and a surge in U.S. housing starts continues to support the soybean market. Positive economic signs from China are adding light support.
  • Soybean export demand has remained solid in the face of high prices, indicating even higher prices may be needed to make supplies last until South American beans hit the market. Soybean production there is expected to surpass U.S. production this marketing year.
  • Farmers have marketed more of their corn straight off the field due to aflatoxin concerns. This freed storage space for soybeans, further limiting the amount of soybeans available and supporting basis.

 

Wheat futures have improved to trade steady to 4 cents higher in Chicago and up 5 to 6 cents in Kansas City. Minneapolis wheat is seeing gains ranging from 1 to 11 cents.

  • Ongoing weakness in the U.S. dollar index is encouraging corrective short-covering today.
  • But Chicago wheat is working on another inside day of trade, signaling trader indecisiveness.
  • While U.S. wheat is expected to receive a boost on the global export market due to tightening world stocks, especially in the Black Sea region, the market is growing weary of waiting for this to occur.
  • Also, soil moisture profiles in the U.S. Plains are expected to improve thanks to recent and forecast rains.
  • Recent rains in areas of the FSU and Europe have also improved winter wheat crop prospects there. Russia's Grain Union expects a sharp rebound in 2013-14 production.

 

Live cattle futures have slightly extended early gains to post slight to moderate gains. Feeder cattle futures have also improved to trade moderately to sharply higher.

  • Traders are favoring the upside as they wait for cash cattle trade to begin. Expectations are for higher trade compared with last week's mostly $125 prices.
  • This expectation is fueled by tighter showlist estimates and ongoing strength in the boxed beef market. This morning, Choice cuts rose 85 cents and Select cuts rose 43 cents. Movement was also impressive at 136 loads.
  • Sharp weakness in the U.S. dollar index is adding to the positive tone as it makes U.S. beef exports more attractive.
  • Feeder cattle futures are benefiting from corrective short-covering as well as the corn market's struggle to rally despite tight supplies.

 

Lean hog futures are choppy with nearbys favoring the upside.

  • Nearby lean hog futures are benefiting from still solid packer demand for hogs, which has kept cash hog bids mostly steady despite increasing supplies. This week's slaughter is expected to be near steady with week-ago and up 3.7% from last year.
  • But deferred contracts are facing some profit-taking as traders continue to question how long the market can buck the seasonal trend. Some feel a downside correction is ahead.
  • Yesterday, the pork cutout value softened slightly, but this encouraged strong movement. Today is shaping up to be another day of strong movement; already, 10.5 loads have changed hands.
  • Support for December lean hogs also comes from the discount they hold to the CME cash hog index, which continues to rise. Most recently is what projected up 23 cents to $83.21.
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