Market Snapshot, Noon CT (VIP) -- September 6, 2013

September 6, 2013 06:58 AM
 

September corn futures are slightly lower, while new-crop contracts are holding 2 to 3 cents higher.

  • Light short-covering is lifting most corn contracts ahead of the weekend. But buying interest is confined to mild corrective buying as traders feel production will be record-large despite late-season heat and dryness.
  • Informa Economics reportedly expects USDA in its September Crop Production Report to peg the national average corn yield at 157.2 bu. per acre for a crop of 14.013 billion bushels. In August, USDA estimated an average yield of 154.4 bu. per acre and the crop at 13.763 billion bushels.
  • USDA's Weekly Export Sales Report was uninspiring as there were net sales reductions of 113,200 MT for 2012-13 and sales of just 328,300 MT for 2013-14, which was well below week-ago and expectations.
  • Heat and dryness is expected to continue into next week. This is pushing crop maturity and limiting the ability of the crop to build a bigger yield. But traders are not concerned.
  • Widespread heat in the 6- to 10-day outlook points to continued accelerated crop development. Above-normal precip is forecast for Indiana and Ohio, but the rest of the Midwest is expected to see normal to below-normal precip.

 

September soybeans continue to trade higher, while new-crop contracts are seeing narrowly mixed trade.

  • Soybeans have been choppy through the morning hours. Mild profit-taking is providing light pressure, while crop concerns are limiting selling interest.
  • Recent and ongoing heat in the Corn Belt is stressful for the filling crop, especially with just scattered showers in the five-day outlook and below-normal precip expected for the western Corn Belt for Sept. 11-15.
  • Informa Economics reportedly expects USDA to lower its national average yield projection next week by 0.2 bu. to 42.4 bu. per acre for a 3.239-billion-bu. crop.
  • This morning's Weekly Export Sales Report reflects continued strong demand for new-crop beans. USDA reported sales of 5,100 MT for 2012-13 and 844,100 MT for 2013-14, which matched expectations.
  • Stats Canada data revealed canola stocks as of July 31 fell to 608,100 MT -- the lowest level in 15 years and well below expectations for 730,000 MT.

 

SRW and HRW wheat futures are extending gains to trade roughly 4 to 8 cents higher. HRS futures are 1 to 4 cents higher in all but the lead-month September contract, which is slightly lower.

  • Strength in the corn market and sharp losses in the U.S. dollar index are encouraging light short-covering in the wheat market.
  • Also, this morning's Weekly Export Sales Report reflected solid demand for U.S. supplies. USDA reported sales of 668,400 MT for 2013-14 and 79,000 MT for 2014-15, which topped expectations.
  • But Egypt again turned to cheaper Black Sea region supplies to fulfill its tender. It bought 60,000 MT of Romanian wheat, which is another reminder that U.S. wheat is not competitively priced against Black Sea origin supplies.
  • Stats Canada pegged total wheat stocks as of July 31 at their lowest level in five years at 5.057 MMT, which is down 875,000 MT from year-ago and slightly below expectations.

 

Live cattle futures are mixed with a downside bias. Feeder cattle continue to post slight to moderate losses.

  • Price action is light and choppy in the live cattle market as traders wait on cash cattle trade to develop in the Plains. As the week has progressed, traders' confidence that cash cattle will eventually trade at steady to firmer prices compared with last week's $123 trade in the Plains has diminished, thus causing buying interest in futures to fade.
  • Morning boxed beef trade is not encouraging for getting packers to raise cash cattle bids. Boxed beef prices were 63 to 73 cents lower and packers moved only 83 loads of product. This is keeping demand concerns on traders' minds.
  • Given tightening supplies, traders are willing to keep futures at a premium to the cash market, but they aren't willing to build that premium. October live cattle futures are currently trading around $2.50 above last week's cash prices.
  • A mildly firmer tone in corn is causing mild profit-taking in feeder cattle contracts, but tight calf supplies are limiting selling interest as traders want to keep futures at a premium to the cash index.

 

Lean hog futures have slightly extended earlier gains and continue to trade slightly to moderately higher.

  • Attitudes are bullish in the hog market after an upside breakout on the daily charts earlier this week. Technical-based buying remains a key source of support.
  • Strong post-Labor Day pork demand remains the fundamental backing for this week's strength in lean hog futures. Strong pork movement suggests holiday clearance was strong and/or retailers are going to actively feature pork this fall.
  • Cash hog bids are steady at most Midwest locations to finish out the week. Packers are working with profitable margins and ongoing hot temps are trimming hog weights, thus keeping packer demand for hogs strong.
  • While attitudes are bullish and there's technical and fundamental support, hog futures may face some profit-taking pressure heading into the weekend.
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