After the Bell: Mixed, Quiet Finish to The Grain Trading Week as Focus Shifts to Weather

Posted on 04/12/2019 2:32 PM

Corn: Nearby corn futures prices finished just fractionally higher and near mid-ranges today. For the week, July corn futures lost 1 cent and December lost 1/2 cent. This week’s winter storm is moving out of the Midwest after dropping as much as two-feet of snow in South Dakota and lesser but still significant amounts from Nebraska to Wisconsin. Three more storms are lining up for the next two weeks, keeping preparatory field work and early planting progress delayed. The delays are not yet a major issue and probably need to continue into May before getting the speculative funds to abandon their near record short futures positions. Talk will continue on the U.S. corn-soybean acreage mix in the next few weeks, what with weather conditions in the Corn Belt less-than-ideal for farmers. This uncertainty should at least somewhat limit selling interest in the corn market. Larger crop forecasts for Argentina and Brazil present a strong headwind to better U.S. export sales that once again slowed this past week.

Soybeans: Soybean and soybean oil futures closed lower today and for the week, with meal paring this week’s decline with a mild rally on Friday. May soybeans closed down 3 ¾ cents this week at $8.95 ¼ while November lost 5 ½ cents to close the week at $9.27 ¼.  Soybean futures will focus on soybean crushing rates and export sales next week. On Monday, the National Oilseed Processors Association releases its March crush rate. Traders are looking for crush to fall to about 165.15 million bu., down from a record 171.90 million a year earlier. Cash soybean meal prices softened late this week on concerns about increased export competition from South America the next several months. There were signs this week that a U.S./China trade deal is getting closer. This is limiting selling interest in the soybean market but buying won’t develop until the deal is signed and all the details are available about China’s commitment to purchasing U.S. commodities. U.S. and Chinese negotiators have agreed to establish enforcement offices to handle disputes under a new trade deal. An enforcement mechanism had been a major sticking point. U.S. negotiators may make a late offer to lift most if not all U.S. tariffs on China in return for Beijing agreeing to a no-retaliation clause in a trade deal.

Wheat: Winter wheat futures finished mostly 3 to 4 cents higher today. Spring wheat dropped 1 to 2 cents. For the week, May SRW futures dropped 3 1/4 cents and May HRW futures slipped 3 cents while the May HRS contract firmed 10 3/4 cents.  Wheat futures are stuck in neutral right now. The downside is limited by the hefty fund short position, while the upside is limited by plentiful global supplies and sluggish export demand for U.S. wheat. That has left spreading as the featured activity of choice the past couple weeks. We doubt that will change next week.  The HRW crop is off to a strong start, while the SRW crop is struggling. Unless there’s a freeze event, it is unlikely traders will get concerned with winter wheat conditions. Spring wheat planting delays will be seen in the Northern Plains, but they must last into May and cause traders to sharply lower acreage expectations for it to fuel a sustained price rally.  

Cotton: May cotton closed up 103 points and July gained 100 points. December cotton closed up 42 points and hit a nearly four-month high today. Contracts did back off their daily highs and closed near mid-ranges. For the week, May cotton lost 33 points. Look for follow-through speculative and technical buying strength on Monday, following today's gains. The daily charts are showing price uptrends in place and the cotton bulls remain resilient.  It appears the U.S./China trade deal is drawing closer.  Signs of stabilization in China’s economy following stronger exports in March, reported today, mean better demand for cotton coming from the world's second-largest economy.    

Hogs:  Hog futures closed mostly higher Friday and for the week. June hogs gained 80 cents to $98.50 and October futures rose 20 cents to $93.18. June was down 47.5 cents this week, while October gained $2.03.  The market will remain supported by expectations for continued large Chinese pork purchases. Thursday’s weekly USDA sales report showed China buying nearly 78,000 metric tons of U.S. pork. This is impressive, with China still implementing 62% tariffs on U.S. imports. For context, that sale is equal to about 171 million lbs., or 30% of weekly production. Wholesale pork values rose $2.25 led by gains in loins and bellies. The market rose to the highest since July this week and that should help to support cash bids next week. Cash hogs have risen nearly $28 to $78.73 since March 7.  Last summer’s high was $85 compared with June and July futures rising near $100 this week. The market will be dependent on cash markets continuing to move higher to support the premiums in the deferred futures. Open interest in October futures is almost double that of the July and August contracts, a rare occurrence and a sign that meat buyers are locking in hedges against a strong second-half export program to China.  China is going to be actively looking to Brazil, Europe, Russia and other suppliers for the cheapest pork and other meat supplies.

Cattle: Live and feeder cattle futures got off to a softer start today, but futures ended high-range with gains for the day and week. Live cattle finished 55 cents to $1.025 higher, with June up $1.10 for the week. Feeder cattle ended steady to 67 ½ cents higher through the November contract. Easter comes next weekend, which means packers will be buying for a reduced kill. That will curb cash prospects, despite a forecast that indicates feedlots will remain muddy. USDA will release its monthly Cattle on Feed Report on Thursday after the close of the markets for an extended holiday break from the market. The report will likely show a drop in Placements for March. With Easter in the rearview mirror and temperatures warming up, consumers will fire up their grills. Strong beef demand should support the cash and futures markets heading into summer.

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