After the Bell: Corn, Wheat Jump After USDA Cuts U.S., World Inventory Forecasts

Posted on 06/12/2018 3:11 PM

Corn: Corn futures closed with gains of around a dime today and near their daily highs. Short-covering and bargain hunting were featured after prices hit a 4.5-month low on Monday. The corn bulls got a solid dose of much-needed positive fundamental news today. The USDA monthly Supply & Demand Report showed lower-than-expected U.S. corn carryover, at 2.102 billion bu. for 2017-18, which is down from 2.182 billion bu. in the May report. USDA pegged 2018-19 carryout at 1.577 billion bu., down from 1.682 billion bu. in May. Both figures were lighter than expected. Global corn carryover was also reduced to 192.69 million metric tons (MMT) for 2017-18, down from 194.85 MMT in May. USDA pegged 2018-19 global carryout at 154.69 MMT, down from 159.15 MMT in May.

Soybeans: Futures ended fractionally higher and below the opening range. Prices opened better on profit taking after sharp declines earlier this month. At midday, prices jumped to session highs after the USDA monthly report forecast smaller U.S. inventories but failed to hold those gains into the close. In its monthly supply-and-demand report, USDA pegged ending stocks for the crop year that ends Aug. 31 at 505 million bushels, down from 530 million bushels a month ago. USDA boosted soybean usage by crushers by 25 million bushels on increased soybean meal exports. Next season’s inventory forecast was cut to 385 million bushels from 415 million last month and below the low end of trade forecasts. The bullish U.S. inventory story was offset by an increase in world inventories this year as USDA raised its Brazilian crop 2 MMT, to 119 MMT. Buying interest continues to be curtailed by uncertainty on whether the Trump Administration will impose any new tariffs at the June 15 deadline for progress on trade talks.

Wheat:  Prices surged following the release of USDA’s report data. SRW and HRW wheat futures posted gains ranging from 16 3/4 to 20 cents, while HRS wheat futures settled around 3 cents higher for the day. Dry spots around the globe once again captured the market’s attention today. While USDA’s U.S. wheat production estimates generally came in higher than expected, traders paid more attention to the department’s 3.5-MMT cut to its Russian wheat crop estimate for 2018-19. Traders are optimistic that a high-protein wheat crop in the U.S. and a smaller crop out of the Black Sea region could help demand for U.S. supplies to grow among global importers.

Cotton: New-crop cotton futures pushed aggressively higher today, with the December contract closing 122 points higher and March through July futures posting gains of 102 to 121 points. The July contract was far less impressive, settling midrange and 46 points higher for the day.  Prices got a boost from today’s Supply & Demand Report from USDA. The department hiked its 2017-18 export forecast 500,000 bales, dropping old-crop carryover a like amount to 4.2 million bales. This also resulted in a lower beginning stocks estimate for 2018-19, cutting new-crop cotton carryover by 500,000 bales to 4.7 million bales. Traders had expected a smaller cut to USDA’s new-crop cotton carryover peg.

Hogs: Futures rallied sharply and negated yesterday bearish downside reversal. The July contract extended its rally to the highest level since March 6. But the deferred October contract rallied about half as much as the July and stayed confined to Monday’s range, providing little new direction. Wholesale pork prices rose this morning, adding to recent gains and providing underlying support to futures and cash hogs. Pork looks competitively priced relative to beef for the summer grilling season. But unfortunately, loin prices continue to struggle as we move toward the low point in annual slaughter in the next several weeks.

Cattle: June live cattle futures finished 12 ½ cents lower, while the August through December contracts settled 12 ½ to 47 ½ cents higher. Feeder cattle posted losses of 15 to 82 ½ cents today. Price action was relatively quiet today as traders wait on indications of cash cattle trade for the week. While futures remain well below last week's cash cattle trade that averaged $114.66, traders are comfortable with the discount structure, as they continue to fear summer cattle supplies. If there are indications of higher cash cattle prices again this week, however, buyer interest in futures would likely increase.

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