Market Snapshot, Noon CT (VIP) -- October 9, 2012

October 9, 2012 06:59 AM
 

 

Corn futures have pared gains to trade fractionally to 2 cents higher.

  • Bulls continue to hold the upper hand in the corn market today, but dollar strength has caused the market to back off its early gains. This strength can be attributed to a downbeat global economic forecast from the International Monetary Fund today.
  • Weekly corn export inspections of 17.368 million bu. fell short of expectations and the cumulative pace has slipped to 30.6% behind last year's pace. This also encouraged light profit-taking.
  • But expectations USDA will lower its corn production estimate by 129 million bu. to 10.598 billion bu. on Thursday is supportive. Traders also expect USDA to trim its 2012-13 corn carryover estimate to 645 million bushels.
  • Gulf basis levels are steady to firmer at midday, reminding the market of tight supplies.
  • South Korea bought 70,000 MT of South American corn, signaling demand destruction.
  • Brazil's Conab expects South American corn production between 71.9 MMT and 73.3 MMT this year, which is near steady with 2011-12.

 

Soybean futures have backed well off their early highs to trade just 1 to 4 cents higher.

  • The dollar has extended early gains, encouraging profit-taking in soybean futures. But this is the extent of selling interest as concerns about tight supplies persist.
  • Weekly export inspections of 45.613 million bu. matched lofty expectations and put the cumulative inspections pace at 77% ahead of year-ago. This is a reminder of the need to ration supplies.
  • Firmer Gulf basis levels this morning and steady levels at midday add to such ideas.
  • While traders expect USDA to raise its production and carryover estimates from last month on Thursday, both of these tallies would still be well below year-ago levels.
  • Also encouraging light profit-taking is news Conab expects record-large soybean production in 2012-13 of 80.1 MMT to 82.8 MMT.
  • China's government will auction 400,000 MT of soybeans on Thursday in an attempt to stabilize domestic prices.

 

Wheat futures have softened slightly to trade mostly 5 to 6 cents higher in nearby contracts at all three locations.

  • Ongoing global wheat crop concerns remain a source of support for wheat futures.
  • Australia says the chances of El Nino developing have diminished. This increases the risk of drier conditions for key wheat areas in the country.
  • Russia's ag minister says the country will harvest 40 MMT of wheat, which compares to his previous estimate of 40 MMT to 42 MMT. He also narrowed his export forecast to 10 MMT from a range of 10 MMT to 12 MMT.
  • Though weekly wheat export inspections of 13.211 million bu. fell short of expectations, cumulative inspections gained on last year's pace to 9.3% behind year-ago.
  • Also favoring market bulls are expectations for USDA to trim 2012-13 carryover by 71 MMT to 627 MMT on Thursday.

 

Live cattle futures are sharply higher in the October contract while deferred months are slightly to moderately higher. Feeder cattle futures have softened to mixed trade.

  • Strong gains in the front-month contract signals traders expect firmer cash cattle trade this week. Last week sales took place at $124 in the Southern Plains.
  • Adding to such ideas are slightly tighter showlist estimates this week.
  • This morning, Choice boxed beef cuts rose $1.14 and Select cuts surged $1.51. Movement surged to 131 loads (just 7 loads short of yesterday's daily total).
  • But buying interest in deferred contracts is being limited by news the International Monetary Fund says risks for serious global slowdown are "alarmingly high." This plus a firmer dollar could trim red meat demand.
  • Feeder futures have softened due to strength in the corn market.

 

Lean hog futures have strengthened to post slight to moderate gains in all but far deferred months, which are choppy.

  • Nearby contracts continue to benefit from strength in the cash hog market. The cash hog index rose another 59 cents today to $81.05. Cash hog bids are steady to firmer.
  • The October contract is just slightly above the cash hog index, while the December contract is $4-plus below the index.
  • But buying interest is being limited by a notable slowdown in pork movement to just 20.5 loads yesterday. This has traders watching for a market top.
  • However, morning pork movement today has already surpassed yesterday's total by more than 10 loads.
  • Thus far demand has kept pace with seasonally expanding supplies, but if the pork market falters and packer profit margins tighten, this could change.
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