After the Bell: Corn, Beans Gain a Third Day on U.S. Crop Condition Decline, Improving Demand

Posted on 07/18/2018 3:09 PM

Corn: While the corn market was only able to muster a low-range close, the market still finished in positive territory with futures up roughly a penny. This marks the third day in a row where December corn prices have closed higher than where they opened — the first time we have seen that occur since May. Corn futures extended their tentative rebound off the July lows as the market continues to generate a bit of support from downgrades in U.S. corn condition ratings over the past month and ongoing signs that export demand for the U.S. grain remains strong. Weekly updates on export sales and export inspections have been impressive, and South Korea reportedly purchased around 60,000 MT of U.S. corn overnight. Our prices are very competitive on the global market, in part due to weather-related production issues in South America and the ongoing problems related to high freight rates in Brazil. But recognition that conditions are generally favorable for U.S. corn development this week, with much of the Midwest enjoying a break from the heat and anticipating some rain, resulted in a low-range close. Dollar strength was another limiting factor.

Soybeans: Futures finished up 2 1/2 to 3 cents and near mid-range following relatively quiet trade today. Mild short-covering and perceived bargain hunting were featured in the soybean market today. With funds short, it’s likely the recent, heavy speculative selling pressure in soybean futures has dried up for now, which takes one bearish element out of the soybean price equation. But funds need a catalyst to actively cover short positions. USDA announced a 199,500-MT soybean sale to Pakistan for 2018-19 delivery. This reminds that U.S. soybean sales to the world, with the exception of China, have been record-high and up sharply from last year at this point. The sharp price break means U.S. supplies are “on sale” to the rest of the world. While new-crop export sales to countries other than China are record-large for this time of year, no reported progress on the U.S./China trade dispute continues to hang over the market like a wet blanket. Traders are awaiting Thursday morning’s USDA weekly export sales report, which is expected to show soybean sales between 200,000 MT to 500,000 MT for 2017-18 and sales of 100,000 MT to 500,000 MT for 2018-19.

Wheat: Futures closed lower and near session lows after failing to build on early market strength. SRW September futures fell 3 1/4 cents to close at $4.94 1/2 while September HRW declined 3 cents to $4.87 3/4. Spring wheat futures fell 4 1/4 to 5 1/4 cents. Prices both in the U.S. and Europe retreated after early strength failed to hold. The weakness in Paris wheat came despite fresh news of smaller wheat crop potential in Germany this morning. World crop are getting smaller and surpluses will be curbed in exporting nations, but overall supplies remain adequate, not tight. U.S. spring wheat production potential continues to be above-average. Rains in some of the spring wheat areas of the Black Sea region this week will be beneficial. Fears of another disappointing weekly USDA export sales report Thursday morning also triggered some profit taking going into the closing bell. Traders surveyed by Reuters see weekly sales of 150,000 MT to 500,000 MT, short of the 800,000 MT to 1 MMT that’s likely needed to excite the bulls.

Cotton:  Futures settled steady to 37 points lower through the July 2019 contract. Futures ended low-range, though that isn’t a big deal in days with a small trading range, such as today. Cotton futures poked above yesterday’s highs, but ran out active buying at that level and faded into the close. Thursday’s trading session will very likely be dictated by weekly export sales data. The focus is squarely on old-crop exports instead of sales, as traders try to gauge how much cotton will get shipped by the end of the marketing year and how much will be carried into 2018-19. The other focal point is weather, specifically conditions in West Texas. Hot and dry weather will persist and put more stress on the cotton crop in that region over the next two weeks. That would suggest seller interest in futures should be limited and fresh upside potential could be opened if the hot, dry forecast verifies.

Hogs: Lean hog futures declined and set new contract lows in August and October futures. It was the fourth straight drop by the August contract and prices closed near session lows — down 70 cents at $67.20 after touching $67.10. October fell 27 1/2 cents and December dropped 45 cents. August closed at nearly a $12.50 discount to the CME Lean Hog Index, more than double the normal discount and a sign the market expects a big drop cash pigs the next month. Midday pork prices were down $1.78, as loin, rib and ham cuts fell sharply. Packers paid $1.39 less for cash supplies today. Slaughter jumped 20,000 above a year ago on Wednesday and it is up 59,000 for the week. The spread between pork and beef continues to widen out to levels that should boost retailer interest. Most pork cuts are now about 20% below a year ago, fully offsetting the 20% tariff Mexico imposed on U.S. imports in June. Traders’ focus Thursday will be on weekly USDA export sales data for the week ended July 12.

Cattle: Live Cattle futures delivered another impressive performance, with live cattle finishing $1.50 to $2.525 higher and feeders closing $2.10 to $3.175 higher. Nearby contracts led price gains and futures settled near session highs. The market continues to signal a lack of concern about seasonal weakness that typically occurs in August amid a drop off in demand for grilling season. The market was also encouraged by some light sales at the online Fed Cattle Exchange auction at $112 today. While the auction featured no sales the week prior, this price is up 50 cents from where cash cattle trade averaged last week across the Plains. This has traders optimistic steady action could occur this week, giving them some incentive to further narrow the discount live cattle hold to the cash market. Adding to the positive tone, both Choice and Select boxed beef values strengthened a bit this morning. Relatively low corn and wheat prices have also been a positive for the feeder cattle market of late, though grain prices have given some hints a low may be in the works.

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