Market Snapshot, Noon CT (VIP) -- February 13, 2013

February 13, 2013 08:05 AM
 

Corn futures have improved to favor the upside in choppy trade. Futures are mostly 1 to 2 cents higher.

  • Ideas the downside has been overdone as corn dropped into technically oversold territory yesterday has encouraged short-covering ahead of midday.
  • Plus, the market recognizes that U.S. carryover supplies remain tight.
  • But South American supplies are soon expected to ease the tight supply situation somewhat.
  • Recent rains in Brazil and Argentina with more in the forecast for Argentina tonight have also caused dryness concerns to fade.
  • Poor export demand for U.S. corn remains a source of pressure. Traders do not expect any major shift in tomorrow's Weekly Export Sales Report.
  • U.S. Energy Information Administration data today showed weekly ethanol production rose 1.9% from the week prior to 789,000 barrels per day last week. Also providing light support is a 3% decline in ethanol stocks to 19.5 million barrels.

 

Soybean futures have also improved to post fractional to 4-cent gains in old-crop futures while new-crop beans are slightly lower.

  • Soybean futures are benefiting from some bull spreading activity as traders weigh current tight U.S. carryover bean stocks against recent projections for improved carryover and production in 2013-14.
  • Traders are also engaging in some corrective short-covering amid ideas the downside has been overdone of late. Traders are unwilling to be caught short in case there is another big weekly export sales tally for beans tomorrow, as has been the trend.
  • But buying interest is also limited as the market expects red-hot soy demand to fade soon as South American supplies hit the market.
  • Gulf soybean demand fell a penny for immediate delivery at midday, while basis was steady to a penny higher for other months.
  • Outside markets are a mixed bag, as the U.S. dollar index and crude oil futures have been chopping around unchanged, but the stock market is under light pressure.

 

Wheat futures have extended early gain a touch to trade mostly 1 to 2 cents higher in Chicago and Kansas City and 2 to 5 cents higher in Minneapolis.

  • Wheat futures are benefiting from light corrective short-covering on ideas the downside has been overdone. A now-firmer corn and bean market is also encouraging of this.
  • Plus, the five-day outlook for the Central and Southern Plains is dry, though there are above-normal chances for precip for these regions in the extended forecast.
  • But to encourage active buying in the wheat market, solid signs export demand is improving are needed. Traders will watch tomorrow's Weekly Export Sales Report for any sign of improvement after the recent price break.
  • News FranceAgriMer raised its forecast of 2012-13 soft wheat stocks estimate slightly to 2.42 MMT is countered by news of a reduction to its French wheat exports estimate within the EU. The firm left its exports estimate outside of the bloc unchanged at 10 MMT.

 

Live cattle futures are slightly to moderately lower at midday. Feeder cattle futures are sharply lower.

  • Light cash cattle trade took place yesterday at prices $2 below the bulk of trade the week prior. Negative profit margins will make packers unwilling to raise bids far from these levels.
  • Today, traders are working to narrow the premium nearby futures hold to this week's early cash trade at $123.
  • But pressure is being limited by improvement in the boxed beef market yesterday.
  • This morning, Choice boxed beef cuts rose 12 cents, but Select values slid 24 cents. Movement was strong at 117 loads.
  • Limited demand for feeder cattle due to unprofitable margins and high feed costs continue to weigh on feeder cattle futures. Firmer corn prices add to the negative tone.

 

Lean hog futures remain narrowly mixed, with nearby contracts favoring the upside.

  • The February lean hog contract remains at roughly a $1.50 discount to the cash hog index, while the April lean hog contract is at nearly a $3 discount to the cash index. This is supporting nearby futures as the February contract expires at noon CT tomorrow.
  • Otherwise, support is limited as a struggling product market has resulted in negative packer profit margins and demand concerns.
  • Yesterday, the pork cutout value did improve, but this was largely due to improvement in hams. Gains must be more evenly distributed and sustained to encourage buying interest.
  • Also, average got weights rose 1.7 lbs. in southern Minnesota and Iowa last week. Expanded near-term supplies have also encouraged recent softness in cash hog bids.
  • Packers are paying steady to $1.00 lower prices for market-ready hogs today.
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