Market Snapshot, Noon CT (VIP), Advice -- September 26, 2012

September 26, 2012 06:52 AM
 

 

CORN PRODUCERS: INCREASE 2012-CROP CASH SALES...
With harvest continuing to advance at a record clip and macro-economic concerns building again, corn futures are rolling over more aggressively. Plus, the price structure in the corn market is giving you no incentive to store corn. As a result, corn hedgers are advised to make a 40% cash sale for harvest delivery to get to 100% sold in the cash market on 2012-crop. Cash-only marketers are advised to make a 15% sale for harvest delivery to get to 75% sold on 2012-crop.

Corn hedgers should hold the Dec. $6.50 put options purchased on 40% of the crop as a crop insurance hedge.

Corn futures continue to soften with most contracts currently posting losses in the upper teens.

  • Heightened economic concerns in Europe have resulted in a strong U.S. dollar index and widespread commodity selling. Early pressure gave way to additional technical selling.
  • Plus, combines are actively rolling, making supplies more readily available.
  • Traders also feel Friday's Quarterly Grain Stocks Report could provide a bearish surprise. Pre-report expectations are for USDA to peg 2011-12 grain stocks at 1.126 billion bu., which we feel is too low.
  • Gulf basis levels are up 1 to 3 cents at midday, pointing to strong demand for the drought-depleted crop. The recent price break may be viewed as a "value buying" opportunity.

 

Soybean futures have plummeted to post 30- to 40-plus cent losses.

  • Technical selling pressure has mounted as the market moved through key levels of support. November soybean futures sliced through the psychologically significant $16.00 mark and are hovering near key support at the August low of $15.55 1/4.
  • Rains in key areas of Brazil are also adding to price pressure as they improve planting and early development prospects.
  • Harvest-related hedge pressure is an additional source of pressure. The current price structure of the market gives farmers little incentive to store beans.
  • Traders are ignoring news of a 140,000-metric-ton (MT) sale of soybeans to an unknown destination for 2012-13.
  • This, plus the recent trend for firmer Gulf basis levels for immediate delivery signal some end-users are taking advantage of the price break by covering their near-term needs.

 

Wheat futures continue to post losses in the mid to low teens at all three locations.

  • Wheat futures are holding up relatively well in the face of heavy pressure on corn and soybeans today. But this spillover pressure and a firmer dollar is keeping bears in control.
  • Rains in the forecast for Australia's wheat belt and for areas of U.S. winter wheat country are adding pressure to wheat.
  • Also, news Egypt's state-owned buyer bought a total of 300,000 MT of milling wheat from France and Romania for December delivery reminds the market U.S. wheat is not competitively priced. However, is does keep prospects for slowed exports from the Black Sea region close at hand.

 

Live cattle futures have softened to post slight to moderate losses. Feeder cattle futures are still enjoying slight gains.

  • Live cattle futures are seeing some followthrough selling today after heavy losses yesterday amid ideas the cash and beef market are working on near-term tops.
  • Packers have been cutting in the red and thus have reduced kill hours to improve margins. Traders are anticipating lower cash trade compared to last week's $126 trade.
  • Yesterday, some light sales took place at $192 to $194 dressed in Iowa and Nebraska. This was down from trade at $194 to $197 in these regions last week.
  • Pressure is being limited by this morning's boxed beef action. Choice cuts rose 2 cents and Select values firmed 18 cents. Movement was especially impressive at 164 loads.
  • Concerns about the global economy and any potential slowdown in red meat demand is adding light pressure.
  • Softer corn prices have encouraged tentative short-covering in feeder cattle futures.

While October lean hogs continue to hold onto slight gains, deferred months have softened.

  • Lean hog futures are facing profit-taking in most contracts due to broad risk aversion.
  • Traders are also working to bring nearby futures in line with the cash hog index. Most recently, it was projected up $1.40 to $72.77 -- nearly $4 below the front month contract.
  • But that should be the extent of selling interest as the cash market has put in a low and the pork market has shown signs of stabilizing.
  • Bids are mostly steady today, however, as the recent gains in the cash market have outpaced those of pork and thus tightened packer profit margins.
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