Market Snapshot, Noon CT (VIP) -- October 22, 2012

October 22, 2012 07:00 AM
 

 

Corn futures are back near session highs with most contracts 1 to 3 cents higher.

  • Corn futures continue to benefit from spillover support from soybeans.
  • Also, the South American growing season is gaining more focus due to tight U.S. supplies.
  • Persistent rains in Argentina have delayed planting, raising the chances more acres will be switched to soybeans.
  • But high corn prices have undoubtedly destroyed demand. Today, weekly corn export inspections of 9.605 million bu. fell well short of expectations.
  • But Gulf basis levels were steady this morning and at midday, reminding traders that supplies are not readily available, especially with harvest coming to a close. Traders expect this afternoon's Crop Progress Report to show harvest 89% complete.

 

Soybean futures have softened slight to trade mostly 5 to 10 cents higher, with nearby contracts leading to the upside.

  • Traders are working to find a price that achieves the rationing needed to stretch supplies.
  • Demand has as yet shown little signs of wavering. This morning, weekly soybean export inspections of 61.422 million bu. came in well above lofty expectations.
  • Cumulative bean export inspections for the 2012-13 marketing year are running 34.6% ahead of last year; USDA's forecasts soybean exports will lag last year by 7.0%.
  • Traders expect USDA to show harvest in the U.S. moved to 82% complete as of Sunday. This plus some producers' decision to store beans in hopes of higher prices tightens the near-term supply picture.
  • And while the South American bean crop is expected to be record large, a lot of unknowns remain for the growing season. Already, there is concern about dryness in northern areas of Brazil, which has delayed planting.

 

Wheat futures are enjoying gains of roughly 5 to 7 cents at all three locations.

  • Wheat futures continue to benefit from concerns about tightening global wheat stocks. This should provide U.S. wheat a needed boost on the export market.
  • Ukraine on Friday announced it will ban grain exports beginning Nov. 15. While Russia's ag ministry has denied the country will follow suit, that has not stopped speculation it will do so. But regardless, dwindling supplies will slow the country's export pace.
  • Today, South Korean flour millers purchased 50,000 MT of U.S. wheat for January shipment.
  • Plus this morning's weekly wheat export inspections tally of 16.406 million bu. improved over last week and topped expectations.
  • But gains are being limited by a generally favorable start for the U.S. winter wheat crop.

 

Live cattle futures continue to see slight gains in nearby contracts, while deferred months are moderately higher. Feeder cattle futures are still narrowly mixed.

  • Live cattle futures continue to see bear spreading after Friday's Cattle on Feed Report came in even smaller than expected for Placements and Marketings.
  • Support also comes from a strong start to boxed beef trade this morning. Choice cuts firmed $1.34 and Select values rose 25 cents. Movement was also decent at 95 loads.
  • Traders will monitor this week's boxed beef action and showlist estimates to form cash cattle trade expectations. Last week cash trade took place at $127 to $127.50; nearby futures are steady to below these prices.
  • Feeder cattle futures are choppy as traders weigh strength in the corn market against tightening supply prospects.

 

Lean hog futures have softened to trade moderately lower in the December contract, while deferred months are seeing lighter losses.

  • Profit taking picked up in the lean hog market as broad risk appetite faded.
  • December futures are at nearly a $6 discount to the cash hog index, signaling traders expect the cash market to weaken over the near-term. Some believe a correction is long overdue as the seasonal trend is for a lull in prices and demand.
  • On Friday, the pork cutout value rose $1.26, but movement slowed to just 33 loads.
  • While supplies are plentiful, packers are keeping bids mostly steady today as they are enjoying wide profit margins.
  • Gains are also being limited by expectations this afternoon's Cold Storage Report will show record-large frozen pork stocks for the month of September at 620.3 million pounds.
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