Futures Mixed Ahead Of USDA Report

4-7-14 – Grain and soybean futures are mixed in overnight trade ahead of the USDA’s April World Agricultural Supply and Demand Estimates report due on Wednesday.\r\n\r\n   Many trade advisors expect the USDA to raise old-crop soybean demand and lower the ending stocks.  They also expect old-crop corn demand to be hiked and the carryout lowered.  Exports of both have been more robust than many had expected.\r\n\r\n   However, some are throwing up a caution flag as technical indicators show a possible topping point in new-crop corn and soybeans.  There also are jitters about whether fund buyers want to keep adding to their long positions because much of the strength in the latest futures rallies have been based on speculative buying.\r\n\r\n   But with the US Dollar moving unevenly higher, speculative interests may lose heart and become longer-term sellers amid ideas export business could suffer from a stronger US currency.\r\n\r\n   US export sales of corn and soybeans are declining seasonally as export offerings for South American new crop are below those of the US Gulf.  The first of several loads of Brazilian soybeans are said to be at or near the US now as grain companies relieve Chinese buyers of unneeded purchases.\r\n\r\n   And hedge funds have been buyers for several weeks.  Many advisors feel their buying interest likely is rooted in fears of a late planting season as cold, wet or even snowy conditions prevent, or threaten to delay, fieldwork.\r\n\r\n   As a reference, the USDA lists the usual beginning of Iowa corn planting as April 19, with the usual start of planting in southern states around March 15.\r\n\r\n   The extent to which the USDA acknowledges the effects of a late season in the Production and WASDE reports will be watched carefully by traders.\r\n\r\n \r\n\r\nWEEKLY CROP PROGRESS REPORTS\r\n\r\n \r\n\r\n   Weekly crop progress and condition reports begin on a national scale today, although some states have begun already, and a few continue to issue only monthly updates through March.\r\n\r\n   Texas last week reported that a lack of precipitation had slowed development of some Hard Red Winter wheat, although rain in other areas had perked up the crop.\r\n\r\n   Kansas also reported very dry conditions for the wheat.  Developmental progress was behind last year and well behind average.\r\n\r\n   However, weather forecasts are calling for rain in the extended forecast that could keep unirrigated fields going.\r\n\r\n   Midwestern crop reports are expected to show cold soil temperatures and wet or even snowy conditions still hampering progress.\r\n\r\n \r\n\r\nHOGS LEAD LIVESTOCK MARKETS LOWER\r\n\r\n \r\n\r\n   Lean hog futures fell out of bed Friday, pulling live cattle down with it.  Trader ideas based on the latest USDA Hogs and Pigs report that hog supplies are larger than expected continue to weigh on the market, as are ideas that the market had gotten too far ahead of the cash market sparked the liquidation. \r\n\r\n   More selling is expected today as traders fret over perceptions that chicken supplies are ample and that consumers will switch to the cheaper meat.\r\n\r\n   The USDA reported its choice beef cutout value Friday was down a sharp $3.21 per cwt at $228.74 and select was down $4.04 at $217.37.  For the week, choice is down $5.72, and select is off $9.97.  There were 120 loads of fabricated product sold into the spot market.\r\n\r\n   Weekly slaughter was 583,000 head, compared with 585,000 last week and 597,000 last year.  The lower slaughter rate could prop up flagging beef markets and get packer margins back up.\r\n\r\n   The CME Feeder Cattle Index for the seven days ended Thursday was $178.09, up $0.26, as supplies tighten, while the April futures contract settled Friday at $177.20, down $1.12, pulled lower by profit taking and pressure from lean hogs.\r\n\r\n \r\n\r\nIN OUR OPINION\r\n\r\n \r\n\r\n–We think low temperatures and rain in large population areas over the weekend likely hampered grilling action and meat purchases.\r\n\r\n–Traders indicate Australian Prime Minister Tony Abbott is having trouble negotiating a Free Trade Agreement with Japan.  Beef, dairy tariffs said to be the sticking point.\r\n\r\n–World Weather reports heavy weekend rain in Argentina.  Too soon for reports of flooding, but we think it’s likely.  Harvest delays and crop damage are possible.