After the Bell: Corn, Beans, Wheat Fall on Beneficial Weather Ahead of Thursday's USDA Reports

Posted on 07/10/2018 3:29 PM

Corn:  Futures opened lower and closed in the bottom third of the daily trading range. December futures fell to a new contract low at $3.57 before ending down 6 1/4 cents at $3.60 1/4. This week’s hot, dry weather will be replaced with cooler temperatures and rain by Sunday or Monday across much of the Midwest, limiting concerns about yield losses from the heat stress. Three-quarters of the U.S. corn crop was in “good” to “excellent” condition on July 8, that’s down just a point from the week prior but a high rating for this point in the season. Current prices reflect levels much higher than the record 176.6 bu. per acre national average yield a year ago. Traders are focused on higher U.S. carryovers in Thursday’s USDA report, ignoring declining global reserve inventories. Traders largely ignore improved export demand and smaller world crop information today. USDA announced a 113,000-MT daily corn sale to Egypt — 60,000 MT for delivery during 2017-18 and 53,000 MT for delivery in 2018-19. Conab lowered its total 2017-18 Brazil corn crop estimate to 82.93 MMT, down more than 2 MMT from its prior estimate and the 97.84 MMT last year.

Soybeans: Futures ended 1/2 cent lower to 1/2 cent higher through the January contract. Meal and soyoil futures ended with slight gains. Soybeans tried to work higher on corrective buying, but buyer interest proved light amid the ongoing trade worries and lack of concern with this year’s crop. However, strength in the meal market today was somewhat encouraging. Meal-led rallies are typically the strongest. But it would be reckless to say today’s price strength was anything other than modest corrective buying. Crop condition ratings held at 71% “good” to “excellent” as of July 8, according to USDA, while the “poor” to “very poor” rating ticked up a point to 7%. While crop ratings in early July mean virtually nothing to final yields for soybeans, a crop rated this highly gives traders hope of above-trendline yields. Traders may want to cover some short positions ahead of USDA’s Supply & Demand Report Thursday. But with USDA saying it will factor Chinese tariffs into its balance sheets, traders are anticipating a sizable increase in projected new-crop ending stocks. That could limit traders’ desire to cover shorts ahead of the report.

Wheat: Winter wheat futures faced heavy pressure today, with the SRW wheat market ending low-range and down 13 1/4 to 18 1/4 cents. HRW wheat futures settled mid- to high-range and down 3 3/4 to 11 1/4 cents. HRS wheat futures posted losses of 9 3/4 to 10 3/4 cents. SRW wheat futures took out support at the 20-day moving average today, triggering sell stops and pushing the front two contracts back below the $5.00 level. Pressure stemmed in part from increasing ideas U.S. supplies may be larger than thought earlier this season. USDA yesterday raised its spring wheat crop condition rating three percentage points to 80%. Meanwhile, there were also some reminders of the Black Sea region’s dominance on the global export market. Germany purchased around 300,000 MT of feed wheat from the Black Sea region last week and this follows news earlier this week that Brazil had purchased some wheat from the region. Meanwhile, Egypt once again purchased wheat from Russia in its tender today with no U.S. wheat offered.

Cotton: Futures settled 66 to 92 points higher through the March contract, with deferred months posting lighter gains. Cotton futures enjoyed some followthrough buying after solid gains the past two sessions. Some of today’s gains were likely powered by deterioration in the condition of the U.S. cotton crop. USDA trimmed the amount of cotton rated “good” to “excellent” by two percentage points to 41% yesterday. Of note, state statisticians rate 42% of Texas’ cotton crop “poor” to “very poor,” which is a historically poor rating. This could signal higher abandonment and possibly a lower cotton production estimate could be coming from USDA on Thursday.

Hogs: July hogs finished 72 1/2 cents lower. The August through December contracts closed $2.35 to the daily $3.00 limit lower. With the limit-down performance in the August contract, daily trading limits will expand to $4.50 for Wednesday. Hog futures were pressured by a combination of technical-based selling, weakness in the cash and product markets and ongoing trade jitters. Given all those pressures, funds piled more money into the short side of the market. Managed money accounts, which were basically neutral as of July 3, have now amassed a sizable short position. The average cash hog bid was 23 cents lower this morning, while the pork cutout value dropped 79 cents. While those aren’t major losses, traders are convinced the cash market has put in a seasonal top and will continue to decline through year-end.  

Cattle: Live cattle futures ended near session lows for a fifth consecutive session on increased speculative long liquidation and some spillover selling from weakness in the hog market. August live cattle closed off 67 1/2 cents, with the October contract down 80 cents. August feeder cattle rose 40 cents, with the October contract up 42 1/2 cents. Beef packing margins slipped roughly $45 per head to $161.95 from Monday and down from $230.75 a week ago. The quick retreat will encourage packers to wait as long as possible this week before bidding after buying a lot of cattle last week. The market acts like most expect packer bids to retreat from the $110 to $112 they paid last week with August cattle at almost a $7 discount to cash at today’s lows. Choice and Select boxed beef prices were steady to firm at midday on good movement of 98 loads. Choice beef rose 50 cents to $207.42 with key seasonal support expected just above $200 this summer. Continued weakness in wholesale pork trade also raised concerns about the depth of the seasonal break in beef.

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