Market Snapshot, Noon CT (VIP) -- October 18, 2012

October 18, 2012 07:05 AM
 

 

Corn futures have extended early gains to trade double-digits higher through the September contract.

  • Corn futures continue to enjoy strong spillover support from soybean futures. Also, the dollar's move off its highs has made buyers more willing to add risk.
  • This morning's weekly export sales of 166,700 MT for 2012-13 met expectations, though this still reflects lackluster demand.
  • With harvest wrapping up, supplies are thought to be less readily available. Some farmers have opted to store corn in hopes of firmer prices. This has resulted in steady to firmer Gulf basis levels and firmer cash prices on average around the country.
  • Adding to supply concerns, Strategie Grains cut its 2012-13 corn crop forecast for the European Union by 900,000 MT to 52.8 MMT.
  • Traders are also starting to pay more attention to the 2013-14 growing season. The CPC's extended weather outlook raises concerns that the next crop will again battle dryness.

 

Soybean futures continue to surge, with November through March futures 30-plus cents higher and far-deferred months enjoying gains in the teens to 20s.

  • Traders are squarely focused on the need for more rationing this morning.
  • While weekly soybean export sales of 523,400 MT for 2012-13 and 1,800 MT for 2013-14 fell short of expectations, the overall soybean export pace remains much more aggressive than needed to reach USDA's export projection.
  • The market is also benefiting from some technical buying, which has helped futures move back into last week's choppy trading range.
  • Also, the market recognizes that South American supplies will not be available to ease any U.S. production shortfall until 2013.
  • Farmers are thought to be storing beans in hopes of higher prices. This adds to concerns about tight supplies and has kept Gulf basis levels mostly steady this week.

 

Wheat futures are enjoying gains in the teens at all three locations, with Chicago leading to the move higher and Minneapolis seeing the lightest gains.

  • Wheat futures are benefiting from short-covering amid ideas the downside has been overdone recently, along with spillover support from the soybean market.
  • Adding to the positive tone are weekly wheat export sales of 410,000 MT, which topped expectations.
  • Strategie Grains lowered its wheat crop forecast for the European Union by 700,000 MT to 123 MMT. This supports ideas tighter global stocks will eventually boost export demand for U.S. wheat.
  • While drought conditions in the Central and Southern Plains have recently improved, much more precip is needed. The CPC's extended weather outlook signals this is unlikely as drought is expected to persist in these regions over the next three months.

 

Live cattle futures continue to enjoy slight to moderate gains. Feeder cattle futures, on the other hand, are slightly lower.

  • Traders are favoring the upside as they wait for cash cattle trade to begin. It is widely expected to get underway at firmer prices compared to last week's mostly $125 trade.
  • Ongoing boxed beef strength will give feedlots leverage in cash negotiations. This morning, Choice and Select cuts rose $1.31 and 31 cents, respectively. Movement was also decent at 98 loads.
  • Recent gains in the boxed beef market have improved packer profit margins.
  • Plus, supplies are tighter this week and are expected to tighten over the long-term. This is expected to be reflected in tomorrow's Cattle on Feed Report.
  • Strength in the corn market is encouraging light profit-taking in feeder cattle futures.

 

Lean hog futures have improved to post slight to moderate gains in the December through June contract. Farther deferred months are slightly lower amid spreading.

  • Pressure from outside markets has eased and with it pressure on hog futures.
  • But gains remain limited by concerns that the hog and pork markets are due for a correction. The front-month contract remains at a steep discount to the cash hog index, signaling traders expect the cash market to soften.
  • Today, cash hog bids are mostly steady to weaker as supplies continue to build.
  • But strong profit margins have encouraged packers to keep kill lines full and limit downside risk for the time being.
  • Pork prices have remained steady to firmer and movement has been strong.
  • Buying interest in deferred months is being limited by expectations Monday's Cold Storage Report will reflect record-large frozen pork stocks for the end of September.

 

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