After the Bell: Grains, Soy Post Small Rallies Ahead of China Talks and USDA Reports

Posted on 03/25/2019 2:45 PM

Corn: Corn futures prices ended the day up a penny, near mid-ranges and did close at four-week high closes. Sellers in the corn futures market are timid at present. Flooding will worsen across the west-central U.S. as snowmelt and rain add more water on already-saturated soils. Rains are forecast to return later Thursday into Friday and the weekend. Also, temperatures in the region will run below average the next 10 days. The weekly CFTC commitments of traders report showed the speculative funds increased their record net short to 261,326 futures and options in the week ended March 19, while commercials further reduced their record small net-short positions to 5,820 contracts. This remains fuel for a major price rally in the corn market if given a new bullish fundamental story. It may be quieter until late week when U.S. negotiators travel to Beijing for more talks and USDA releases its Prospective Plantings and Quarterly Grain Stocks Reports. China is talking positive about working to satisfy U.S. demands to reach a trade deal and that has grain exporters watching for more purchases of U.S. ag commodities.  USDA said this morning that corn inspected for export rose to nearly 1 MMT in the week ended March 21, up from 803,213 a week earlier and above the top end of trade estimates, proving a midsession boost. Still, the corn market needs a bit higher weekly numbers than this week’s inspections to reach USDA’s annual export target.

Soybeans: Prices closed slightly higher and in the upper half of today’s ranges. May soybeans rose 2 ¾ cents to $9.06 ½ and November gained 2 ¼ cents to $9.39 ¾. Meal closed with fractional gains and soyoil futures rose about 16 points. Prices firmed today on hopes for additional Chinese soybean purchases this week. China will work to boost imports and achieve a more even balance of trade with the U.S., Vice Premier Han Zheng said on Sunday, just days ahead of the latest round of talks aimed at bringing an end the tariff war, the South China Morning Post reported. Han also said that China would improve market access and ban the practice of forcing foreign firms to transfer proprietary technology to joint venture partners. U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are due to visit Beijing on March 28 and 29. U.S. soybean export inspections rose slightly to 857,970 MT in the week ended March 21 from a week ago, including about 335,000 MT shipped to China, which reduced its global soybean imports 18% to 4.456 MMT in February, including 1.986 MMT from Brazil. U.S. soybean shipments to China rose to 907,754 MT in February, up from 135,814 MT in January and just a fraction of last February’s 3.35 MMT. The CFTC reports showed funds reduced net-short positions 26,205 contracts, to 63,992 futures and options last week, still the biggest bearish bet for this time of the year. Commercials cut their net-long position to 1,539 futures and options but remain the largest ever for this time of the year despite record supplies coming quickly from South America.

Wheat: Winter wheat futures finished 3 1/2 to 4 3/4 cents higher in the most actively traded contracts. Spring wheat futures ended narrowly mixed with a slight downside bias.  Wheat futures were supported by corrective buying as funds lightened short positions ahead of Friday’s Prospective Plantings and Quarterly Grain Stocks Reports. With funds holding major short positions, additional short-covering is possible. Fundamental support came from flooding concerns across winter wheat areas. The Central Plains are the worst, but there is also flooding in the Midwest and Mid-South. Expected flooding in the Northern Plains means spring wheat planting delays are a risk, but today’s price action suggests traders’ level of concern isn’t heightened yet, as HRS futures lagged the winter wheat markets.

Cotton: Cotton futures closed higher and made new swing highs for this current rally. May cotton rose 1.15 cents to close at 77.73 cents, with December up 43 points to 75.73 cents. Prices rose in a continuation of Chinese trade-talk optimism. Last week, USDA’s sales report showed new buying from China for a second straight week. China will work to boost imports and achieve a more even balance of trade with the United States, Vice Premier Han Zheng said on Sunday, just days ahead of the latest round of talks in Beijing aimed at bringing an end the tariff war, the South China Morning Post reported. Han said also that China would improve market access and ban the practice of forcing foreign firms to transfer proprietary technology to joint venture partners. China will reduce direct government intervention in its vast industrial sector, Miao Wei, the industry minister said on Monday, as Beijing seeks to ease concerns about its industrial policy, core to Washington's complaints in the Sino-U.S. trade war, Reuters reported today. Our survey showed acreage rising 5.7% to 14.9 million acres this year from 14.1 million a year ago. With average abandonment rates, that would lead to a large build-up in carryover supplies.

Hogs: Lean hog futures settled narrowly mixed through the July contract, with far deferred months posting moderate losses. Futures generally settled mid- to low-range on the day. Lean hog futures set back today, which was not all that surprising considering the market’s parabolic move to the upside the past several weeks. A Cold Storage Report that showed a bigger build in frozen pork stocks during February than is typically seen and then we expected added some reason for traders to book some profits today. In addition, cash prices slipped a bit this morning.  But the spread of African swine fever in Southeast Asia remains a supportive factor. Chinese trade data out over the weekend reminded that China has already increased its pork imports and those numbers could climb dramatically higher, especially if tariffs on U.S. pork are removed. Later this week, there will likely be more updates on how far apart negotiators are, as key U.S. trade officials will be holding talks in China.  

Cattle: April live cattle closed down $2.05 and the June contract was down $2.275. May feeder cattle futures closed down $3.07. All cattle contracts finished nearer their daily lows and saw heavy profit-taking pressure from recent solid gains that pushed prices to, or near, contract highs. A potentially bearish element in the cattle futures market is the fact that speculative funds increased their net-long positions to 145,159 futures and options as of March 19-- near the record high of 145,237 contracts set in September 2010. That hints there could be more long liquidation in the futures this week. Today's noon USDA beef report showed cutout value for Choice grade down 27 cents and Select up 69 cents, on light movement of 32 loads. Friday’s USDA Cattle on Feed Report showed feedlot inventories rose 0.7% above a year ago on March 1. That was larger than the 0.4% decline expected after placements jumped an unexpected 2.2% in February. However, many questioned the 13% increase in Iowa placements and 3% increase in Nebraska last month, given poor feedlot conditions. On the positive side, Friday’s USDA Cold Storage Report showed 479.3 million lbs. of beef in the nation’s freezers as of Feb. 28, roughly 10.7 million lbs. lighter than anticipated and a 30.9-million-lb. drop from January.

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