Market Snapshot, Noon CT (VIP) -- September 10, 2012

September 10, 2012 06:52 AM
 

Corn futures have softened to post losses around 7 to 9 cents.

  • Traders are reducing risk exposure ahead of USDA's Crop Production and Supply & Demand Reports Wednesday morning.
  • While the reports are expected to show a shrinking crop, they will also reflect some demand destruction.
  • This morning's export inspections report served as a reminder of demand destruction. Corn export inspections again fell well short of expectations at 9.755 million bushels.
  • Light pressure also comes from harvest-related hedge pressure. A Reuters poll of analysts shows they expect USDA to peg harvest at 17% complete as of Sunday.

 

Soybean futures are down 4 to 10 cents, with deferred months leading to the downside.

  • Traders are exercising caution ahead of USDA's reports Wednesday morning, which are expected to reflect tight old- and new-crop carryover, along with a small production peg of 2.638 billion bushels.
  • Soybean export inspections of 12.933 million bu. fell short of expectations and week-ago, signaling some resistance to high prices.
  • Plus, the start of harvest has led to softer basis levels and pressure on futures. Traders expect today's Crop Progress Report to show harvest is 3% complete as of Sunday, which would be a record.
  • However, downside risk is limited by still-strong global appetite for soybeans. Chinese customs data shows that while the country's imports for August fell 2% from last year, its imports through the first eight months of this calendar year are up 17.4%.

 

Wheat futures have softened to post slight losses in most contracts at all three locations.

  • Weakness in the corn market has caused wheat futures to soften.
  • Traders in the wheat market are also readying for the USDA's wheat balance sheet adjustments. Expectations are for USDA to raise its 2012-13 carryover estimate by 11 million bu. from last month to 709 million bushels.
  • While wheat export inspections of 19.586 million bu. fell just short of expectations and were down from last week, they gained on last year's pace.
  • But concerns about tightening supplies in the Black Sea region, along with dryness in Australia and the U.S. Southern Plains is limiting pressure.
  • Countering this, however, is news the government of India says it's likely to produce "more than 90 MMT" of wheat this year, which is higher than earlier indicated.

 

Live cattle futures continue to favor the downside in choppy trade. Feeder cattle futures are steady to slightly lower.

  • Last week's firmer cash cattle trade is already factored into prices, leaving live cattle vulnerable to profit-taking today.
  • Plus, just light cash sales in Texas last week and declining profit-margins could make packers unwilling to raise cash bids again this week.
  • This morning, Choice boxed beef values firmed 53 cents, while Select cuts fell 55 cents. Movement was decent if not impressive at 97 loads.
  • Feeder cattle futures continue to await proof a high is in for the corn market -- something they do not expect to occur until following Wednesday's USDA reports and the conclusion of the FOMC meeting Thursday.

 

Lean hog futures are narrowly mixed, with nearby contracts firmer and deferred months choppy.

  • While fundamentals certainly favor bears, traders are watching for a seasonal low as some feel heavy supplies are factored into prices, especially as the cash hog index is now trading in line with October futures.
  • But cash hog bids are again steady to lower today as packers are having no trouble securing needed supplies.
  • Pork movement has remained consistently strong, but this has been accompanied by equally consistent price declines in the pork cutout value. The pork market must show signs of bottoming for traders to have confidence futures are doing the same.
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