After the Bell: Grains, Soybeans Grind Higher Ahead of Weekly Export Sales Report

Posted on 08/08/2018 3:20 PM

Corn:  Corn futures settled 1/2 cent higher through the May contract. Futures ended near session lows, but just above their opening levels. Light two-sided trade was seen in the corn market today, suggesting traders evened positions ahead of Friday’s Crop Production and Supply & Demand Reports from USDA. More light and choppy price action is possible Thursday in additional pre-report positioning. But trades will have weekly export sales data to guide the market. Traders expect corn sales 300,000 MT and 600,000 MT for 2017-18 and 400,000 MT to 900,000 MT for 2018-19. Bullish weekly export sales figures could spark fund short-covering. Managed money accounts were short nearly 96,000 futures contracts of corn as of July 31. Forecasts call for normal to above-normal temps over the next two weeks, though oppressive heat is not expected. The western Corn Belt is expected to be mostly dry, while the eastern Belt is likely to see scattered rains. With the corn crop already advanced in maturity, hot, dry weather would further push the crop and may take the top off yield potential.

Soybeans: Soybean futures ended up 4 1/2 to 5 cents higher through the March contract and nearer their daily highs. The soybean market held up surprisingly well in the face increased U.S. and Chinese tariffs announced since the close on Tuesday. The U.S. said that it will begin imposing 25% tariffs on an additional $16 billion of Chinese goods from Aug. 23. China followed with their own 25% tariffs on $16 billion of U.S. goods, also effective Aug. 23. Many market watchers still believe China will have to come to the U.S. for soybeans later this year and into early next year due to limited availability of beans on the world market during that timeframe. Soybean prices on the Dalian Commodity Exchange jumped almost 4% overnight, the biggest daily gain in a decade after customs data showed arrivals in July fell 7.9% from June and down 20.6% from a year ago. Chinese soybean imports are expected to hold around 8 MMT in August and September. Traders are awaiting Thursday morning’s USDA weekly export sales data, which is expected to show soybean sales in 2017-18 at 100,000 MT to 400,000 MT and sales of 300,000 MT to 600,000 MT for 2018-19. Focus will then quickly turn to Friday’s USDA crop reports that will feature the first survey-based look at the soybean crop.

Wheat: Wheat futures ended higher after trading both sides of unchanged with SRW settling mid-range and HRW and HRS futures closing in the upper half of the daily ranges. SRW futures closed up 1 1/4 to 4 3/4 cents with HRW and HRS futures climbing generally 2 to 5 cents. The market remains focused on shrinking global supplies that are continuing. Losses in Europe and the Black Sea regions are well documented during the last two weeks as prices appreciated. Today, the markets’ focus shifted to hot, dry weather forecasts for Australia and Canada the next two weeks, which is reducing yield potential.  The wheat market needs an export sales kick for extending the rally. Not much help is expected in tomorrow morning’s weekly sales tallies, with traders looking for sales of just 200,000 MT to 500,000 MT in the week ended July 2. Sales need to jump into the 700,000 MT to 1 MMT range to signal the overseas buyer is finally turning to supplies from the U.S.

Cotton:  Cotton futures closed with modest losses near the daily lows. December futures closed down 72 points at 87.18 cents, the lowest closing price since July 24.  Widespread rains will help to revive any cotton not already damaged in parts of Texas this week. Rains also headed for parts of the Mid-South aid the crop outlook. Traders are looking for production to slip to 18.39 million bales in Friday’s USDA update, down from 18.5 million estimated in July. Exports seen about steady with the 15 million bales forecast last month, with a relatively wide range of 14.7 to 15.5 million. Export sales on Thursday morning could provide temporary price direction, though focus will remain on pre-report positioning if there are no surprises in the sales data.

Hogs: Lean hog futures closed down $1.00 in the August contract and down $1.575 and $1.25 in the October and December contracts, respectively. New contracts lows were established again today. The price washout continues in the hog futures market. With market-ready hog numbers building seasonally, the decline in cash hog prices may continue into fall. The cash hog market is tracking 2016 very closely. In that year, cash prices fell into November before bottoming. It’s likely going to take some positive U.S. trade developments for hog futures to put in a price bottom. Cash hog prices dropped another $1.76 this morning, with the five-day rolling average price at $48.10. The midday pork report showed cutout value up 25 cents. Bellies posted good gains, but all the other cuts were lower. Movement was a strong 241.4 loads. On the potentially positive side, it’s very likely the large speculative funds are at or near record short positions in lean hog futures. With funds that heavily weighted to the downside, they are going to eventually have to cover short positions.

Cattle: August live cattle futures settled 25 cents lower. The October through February contracts ended 7 1/2 to 15 cents higher. Feeder cattle posted gains of 7 1/2 cents to $1.025 through the January contract. Live cattle futures bounced back from early weakness in a sign traders don’t want to press the market much lower given the discount contracts hold to the cash market. Cash cattle trade so far this week has been light, with sales reported at $112.50 reported Tuesday. That’s down from an average of $112.98 last week. This morning’s Fed Cattle Exchange online auction failed to produce any sales, as sellers passed on $112.00 bids. So, the market is still waiting on active cash trade with expectations for slightly softer prices compared to last week. While the cash market is expected to soften this week, wholesale beef prices firmed this morning. Choice boxes are showing signs of stabilizing after falling roughly $27 from the mid-May high to the recent low. This would be an early seasonal low, so there’s risk a short-term pause could be followed by another leg lower in wholesale beef prices.

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