Market Snapshot, Noon CT (VIP) -- October 19, 2012

October 19, 2012 07:02 AM
 

 

Nearby corn futures continue to favor the upside through the July contract, while deferred months are slightly lower.

  • Nearby corn futures continue to benefit from concerns about tight supplies.
  • Recent steady to firmer Gulf basis levels and strength in basis around the country is illustrative of this.
  • But the other side of the equation -- demand -- is limiting gains. High prices have encouraged users to seek alternatives to U.S. corn.
  • Most recently, Japan's corn-for-feed use declined in August, while wheat use in feed increased by a like amount.
  • Also, Informa Economics reportedly expects high corn prices to entice producers to increase corn planted acreage over last year's record tally to 97.5 million.
  • Negative outside markets are also limiting commodity buying interest today.

 

Soybean futures have softened to post losses ranging from 4 to 12 cents, with deferred months leading losses.

  • Traders are booking profits after strong gains yesterday. Dollar strength is also encouraging of this.
  • The market extended losses on news Informa Economics reportedly estimates soybean acreage at 80 million, which is up 2.8 million acres from 2012.
  • Plus, the general consensus is that this year's yields were generally "better than expected."
  • And record-setting production in South America is expected to ease supplies down the road. However, the crop is just now being planted -- a lot can change.
  • But all of this does not change the fact that supplies are tight and demand is strong. This will continue to limit downside risk for soybean futures.

 

Wheat futures continue to enjoy gains around 10 to 12 cents in Chicago and Kansas City, while Minneapolis wheat is trading around 4 to 7 cents higher.

  • Despite spillover pressure from soybeans and strength in the U.S. dollar index, wheat continues to enjoy solid gains.
  • Support comes from news Ukraine will reportedly ban wheat exports starting Nov. 15. Ukraine's ag ministry today said the country's wheat stocks may be exhausted by Nov. 15-20.
  • Also this morning, USDA announced export sales of 230,000 MT of wheat to unknown destinations for 2012-13. This adds to ideas U.S. wheat is receiving a boost in export demand thanks to tightening global stocks.
  • Adding to the positive tone, Informa Economics reportedly estimates all wheat acreage of 56.8 million, which is down 315,000 acres from its September estimate, but up 1.1 million acres from 2011-12.

 

Live cattle futures have softened to trade slightly to moderately lower through the April contract, while deferred months are slightly firmer. Feeder cattle futures are posting slight to moderate losses.

  • Cash cattle trade is underway at prices mostly around $127 to $127.50, which compares to trade at mostly $125 last week.
  • Traders had a sell-the-fact reaction to firmer cash trade, despite the fact that the October contract is at a discount to the cash market.
  • This morning, Choice and Select cuts slid 1 and 51 cents, respectively. Movement was decent at 95 loads. Traders are concerned that high beef prices are trimming demand.
  • Dollar strength and heavy losses in the stock market add to the negative tone.
  • Traders are also hesitant to add risk ahead of this afternoon's Cattle on Feed Report, though it is expected to show tightening supplies.
  • Feeder cattle futures are being pressured by ideas the corn market may be working on a near-term low.

 

Lean hog futures continue to enjoy slight to moderate gains in most contracts.

  • Traders are covering short positions in lean hogs ahead of the weekend, signaling they believe some life is left in the contra-seasonal hog rally.
  • The cash hog market is mostly steady today as packers are still keeping slaughter above year-ago levels as they are enjoying profitable cutting margins.
  • But these did tighten somewhat yesterday when the pork cutout value softened 92 cents. But as this was largely due to a $7.38 decline in loins, signaling it's still too early to call a top in the product market.
  • Also limiting gains are expectations Monday's Cold Storage Report will show record-large frozen pork stocks for the end of September.
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