After the Bell: Corn, Soybean Washouts Show Signs of Climaxing; Cattle Rally

Posted on 06/19/2018 3:00 PM

Corn:  Futures ended down 1 3/4 to 2 1/4 cents today, but up about 15 cents from the day’s worst levels. Today’s spike lower is a sign of a selling exhaustion. However, there are still plenty of technical hurdles to overcome on any rallies. New buying interest will require progress on trade with China and at least a small, new weather threat to the U.S. crop. Prices fell sharply earlier today as the threat of new tariffs against China pits the world's two largest economies against each other, which could eventually disrupt global economic growth. Trump's threat to escalate a trade conflict with China is likely a negotiating tactic and not a "suicide pact," Lloyd Blankfein, the chief executive of Goldman Sachs & Co, said today. We sure hope Blankfein is correct and that talks are already talking place behind all the rhetoric. The weather looks nearly ideal for the next week, with regular showers moving through the Midwest and temperatures falling back near normal. Heat is expected to return late next week, but forecasters are reluctant to predict how long the above-normal temperatures will last or whether more rain develops.

Soybeans: Futures posted losses of 19 to 20 cents in most contracts today, though that was nearly 50 cents off the lows. Meal and soyoil futures also finished well off session lows. Soybeans were hammered by concerns over rising trade tensions between the U.S. and China. President Donald Trump threatened tariffs on another $200 billion of Chinese goods late Monday, which prompted China to say it would consider additional moves. The knee-jerk reaction in the markets was obviously swift, though the sharply rebound off session lows into the close suggests today’s price action could have been capitulation.

Wheat: SRW futures hit 2.5-month lows and closed down 5 3/4 to 7 cents, while HRW contracts hit five-month lows and were down 11 1/2 cents in the July and up 3 1/4 cents in December. Spring wheat futures fell 10 1/4 to 14 1/4 cents. All contracts finished well off their daily lows and near mid-range. The strong downdrafts in wheat futures the past week have the sellers exhausted at present and we suspect the markets are at or very close to near-term price bottoms. The China/U.S. trade dispute was ratcheted up another notch today, with new proclamations on more tariffs from President Donald Trump, and the tit-for-tat threat of further retaliation from China. The escalation of rhetoric from both sides has sparked concerns about slowing economic growth in emerging markets, which could lower worldwide wheat demand.

Cotton: Futures were hammered lower and ended at or near their daily lows today, with the July contract down 400 points. The December contract ended down 395 points and hit a four-week low. The specter of a major trade war between the U.S. and China, with U.S. cotton right in China’s crosshairs for retaliation, sent the cotton futures tumbling lower today. China has reportedly targeted U.S. cotton for a 25% import tariff. Cotton futures were also caught in the downdraft of falling prices across the raw commodity spectrum today. And a strong U.S. dollar index that scored an 11-month high only added insult to injury for the cotton market.

Hogs: Futures closed sharply lower and near the bottom half of their respective daily trading ranges. July ends down $1.85 at $81.875, with the August through December falling 85 cents to $1.75. Lingering worries about trade spats with China and Mexico put the market on the defensive to start and prices failed to recover, even as cattle rallied. That suggests increased spreading against cattle. It was positive news to hear President Donald Trump tell a group of small business executive that there is some progress on the slow-moving talks to update NAFTA trade accord with Canada and Mexico.

Cattle: Live cattle futures settled 22 1/2 cents higher in the front-month and 60 cents to $1.25 higher in deferred contracts. This marked a high-range close for most contracts. Feeder cattle futures posted gains of 65 to 95 cents for the day. Cattle futures uncovered buying interest on an early move to the downside sparked by a sharply lower Dow Jones Industrial Average and concerns about what a China/U.S. trade war could mean for the U.S. economy. Softer beef prices this morning and higher showlist estimates also worked to packers’ advantage in this week’s cash negotiations. But the early move lower that took some contracts under the 40-day moving average encouraged some bargain buying.

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