After the Bell: Corn, Soybeans Little Changed After No Major Bearish WASDE Surprises

Posted on 04/09/2019 2:30 PM

Corn:  Futures prices finished fractionally higher today but off their daily lows that scored contract lows in the May, July and September contracts. Focus today was on the release of the monthly USDA supply and demand report. On old-crop corn, USDA increased estimated old-crop corn carryover by 200 million bu. from last month, which was 44 million bu. above the average pre-report trade estimate. USDA made no changes on the supply side of the balance sheet for old-crop corn. On the demand side, USDA cut 75 million bu. from estimated feed & residual use. USDA made a 75-million-bu. cut to estimated corn exports, dropping the tally to 2.3 billion bushels. USDA now puts the national average on-farm cash corn price at $3.40 to $3.70, up a nickel on the bottom and down a nickel on the top end of the range from last month. For global carryover, USDA put corn stocks at 314.01 MMT for 2018-19; up from 308.53 MMT in March The fact the corn market did not suffer further losses following the slightly larger-than-expected ending stocks number now has the bulls hoping all the bearish fundamental news has been factored into futures prices. However, it’s too soon to make that call. Price action the rest of this week could provide a better clue on this notion. While weather is becoming a bigger market focus for speculative fund traders sitting on large net-short positions, there remains time to get the corn planted and for temperatures to warm up. The first U.S. corn plantings report of the season on Monday showed 2% of the crop planted, which matches both trade expectations and last year’s pace for the week.

 

SoybeansFutures ended steady to fractionally lower and near midrange this afternoon. May futures closed unchanged at $8.98 ¾, with November slipping ½ cent to close at $9.31 ¾.  It was a two-sided trade with little change in prices.  The story remains little changed with support still holding based on a China deal that will eventually improve sales to the biggest consumer of the oilseed. Rallies continue to be capped by record global inventories, which USDA raised again today based on larger crops in South America. U.S. ending stocks are projected at 895 million bu. compared with 898 million bu. expected, and 900 million bu. in the March USDA report. World ending stocks are also less negative, at 107.36 million metric tons (MMT) forecast this month, below the 108.04 MMT expected and up from 107.17 MMT last month. Production numbers for Argentina are a tad lighter than expected, coming in flat month to month at 55 MMT versus trade expectations of 55.4 MMT. Brazilian production was raised to 117 MMT from 116.50 MMT last month and expectations for 116.3 MMT. African swine flu continues to spread as Vietnam now has 23 provinces affected, Mongolia has seen 10% of its herd affected, Cambodia has seen outbreaks and Thailand is on the lookout for a border jump. The total number of hogs culled has topped at least one million head across east Asia already. Chinese meal demand has fallen 25% since the October high and China National Grain and Oils Info Center says China meal demand could drop 5% for the season.  

Wheat: Winter wheat futures closed 3 1/2 to 5 3/4 cents lower in the most actively traded contracts, which was near mid-range. Spring wheat futures finished fractionally to a penny lower. Wheat futures were pressured by USDA’s increase in winter wheat crop condition ratings Monday afternoon. USDA’s “good” to “excellent” crop ratings increased a stronger-than-expected four percentage points, with improvements in the HRW states more than offsetting declines in some of the SRW states. USDA’s Supply & Demand Report didn’t do anything to change momentum as U.S. old-crop ending stocks were increased more than anticipated and global wheat carryover also increased from last month. Strong U.S. winter wheat crop ratings and ample wheat supplies are likely to keep funds comfortable holding aggressive short positions in SRW and HRW contracts. It could encourage them to defend their short stance on a corrective price bounce – if a catalyst doesn’t develop that causes them to aggressively cover shorts.  

Cotton:  Futures prices sold off today on profit taking from recent gains. May cotton finished down 83 points after scoring a 3.5-month high early on. December closed down 27 points and near mid-range after also hitting a 3.5-month high earlier today. Focus of cotton traders was on this morning’s monthly USDA supply and demand report. USDA’s cotton ending stocks forecast at 4.4 million bales was increased 100,000 bales from March, the result of a 100,000-bale cut to projected domestic use (to 3.1 million bales). That domestic use number is the lowest for the U.S. since the 1890s! USDA today projected the 2018-19 national average on-farm cash cotton price at 69¢ to 71¢, unchanged from last month. Global cotton carryover was increased 350,000 bales from last month to 76.44 million bales. Global ending stocks are still forecast to decline 4.61 million bales (5.7%) from the 2017-18 marketing year. Working in favor of the cotton market bears was a report today from The International Monetary Fund that cut its global economic growth forecast for 2019 to 3.3% from 3.5%, blaming global trade tariffs.

HogsLeans hogs were mostly limit down and daily limits will expand to $4.50 on Wednesday. June fell $3 to close at $95.15 and October futures fell $3 to $88.30.  The rally in cash hog prices has lost momentum and encouraged active fund long liquidation in futures today. Before today some of the deferred futures were trading as much as $20 over the CME Lean Hogs Cash Index at $78.68. Fresh pork cutout values slipped 6 cents lower at midday after yesterday reaching the highest since July. Sales were slightly better but not strong enough to support new buying in the futures. The market will remain volatile as traders wait for more news on the U.S./China trade talks and weekly USDA export sales data on Thursday.  In the week ended April 2, funds increased net-long positions to 36,791 futures and options contracts, up 12,591 contracts. That was the biggest long bet since early December. USDA trimmed its 2019 pork production forecast 110 million lbs. to 27.33 billion lbs. However, it was disappointing the agency increased its export forecast only 50 million lbs. to 6.175 billion lbs.  

Cattle: Live cattle futures edged lower today, with all but the front month settling 7 ½ to 40 cents lower. April live cattle finished a dime higher. Feeder cattle settled narrowly mixed. Cattle futures held up well in the face of heavy spillover pressure from limit losses in lean hog futures today. Underlying support stems from anticipation of strong seasonal demand as consumers fire up their grills as well as some weather concerns. A winter storm is expected the latter half of the week for the Plains and Midwest, bringing cold temperatures and heavy rain and snow. That will muddy feedlots and stress animals that have already faced more than their fair share of stressful conditions this winter. Given the inclement weather and still strong packer margins, we would not be surprised to see higher cash action this week.  Feeder cattle futures are trading several bucks above the cash index, which put a bit of pressure on nearby contracts today. But cheap feed supplies remain a supportive factor for that market.

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