After the Bell: New Lows in Grains; China Buying Rumors Boost Soybeans

Posted on 03/07/2019 3:16 PM

Corn: Corn futures finished with losses of 5 1/2 to 7 1/4 cents and end near session lows. Futures were unable to find support from weekly export sales of 1.251 MMT – 969,700 MT for 2018-19 and 280,900 MT for 2019-20. Instead, funds remained active on the short side of the market, partly due to selling in the wheat market and favorable weather for South American crop development. Sell stops were triggered as support levels were violated, which extended losses. The low-range close sets the market up for followthrough selling to open the overnight session, though a corrective rebound can’t be ruled out at some point tomorrow. Funds continue to pile into short positions. We estimate they are now short roughly 70% of their historical record for this time of year in 2016 and also 70% of their record short from November 2017. History says when the boat gets weighted this far in one direction, a strong correction isn’t far off, but there is risk of funds piling even more heavily into the short side of the market near-term.  USDA releases is monthly Supply & Demand Report Friday.

Soybeans:  Soybean futures closed up 1/4 to 1 cent in the nearby contracts today, hit nine-week lows and closed near mid-range. Nearby meal futures finished near steady and bean oil was down 13 points in the nearby contracts. The soybean market bulls got very little price traction from a Bloomberg report today that Chinese buyers purchased about 2 million metric tons (MMT) of U.S. soybeans. And Reuters also reported Chinese state-owned firms bought at least 500,000 MT U.S. soybeans today for shipment primarily from the Pacific Northwest from June to September. There was no Chinese buying confirmed in the daily USDA reporting service this morning. USDA in its weekly export sales report this morning said 311,400 MT of beans were sold for 2018-19, including 146,300 sold to China. Sales for 2019-20 were 72,000 tons, all to Mexico. Both totals were well below trade estimates. However, soybean meal export sales in week ended March 1 were 230,500 MT — at the top end of trade forecasts.

Wheat:  Winter wheat futures prices closed down 9 to 12 1/4 cents today. Prices closed near the session lows and careened to new contract lows again today. Spring wheat futures closed steady to down 1 ¼ cents. The blood-bath in the wheat market continues, with no strong, early chart clues that market bottoms are close at hand. Wheat bulls received no support from improved U.S. export news. USDA said this morning in its weekly export sales report that wheat sales rebounded to 621,700 MT in the latest reporting week, topping trade forecasts for 200,000 to 500,000 MT of sales. New-crop sales were 205,000 MT, doubling trade ideas. Lower European and Black Sea wheat futures prices continue to lead U.S. prices to new lows in hopes of improving their own exports. It’s a race to the bottom. Major wheat-growing regions of the world are not experiencing significant weather problems, save for some dry and hot weather in Australian wheat regions.

Cotton:  Cotton ended lower for a second day after yesterday touching the highest prices in nearly two weeks. May cotton closed 106 points lower at 73.13 cents per pound. Cotton prices fell on worries about export demand as the U.S. Dollar Index rose to a new 2019 high. A strong greenback makes commodities prices in dollars more expensive for overseas buyers. USDA reported export sales rose to 114,000 bales in the week ended Feb. 28, up from 85,544 bales a week earlier. However, the data also showed 1,200 bales that were cancelled by China. Cotton shipments for the marketing year are down 8% from a year ago and total commitments are running 11% behind a year ago.  Evidence is growing that the trade war between the U.S. and China is doing real harm to the global economy.  U.S. President Donald Trump said on Wednesday that trade talks with China were moving along well and predicted either a “good deal” or no deal between the world's two largest economies.

Hogs:  April lean hogs closed up 90 cents, with the June contract up 30 cents. Both closed near their daily highs. More short covering was featured today. Prices have made impressive rebounds from their February lows, and weekly high closes on Friday would be a bullish technical clue the futures market has bottomed out. This morning’s weekly USDA export sales report showed 24,400 MT of pork sold last week, but no new Chinese business was reported. China did load 3,400 MT for shipment last week, which is more important since the nation has yet to lift import tariffs. The noon pork report showed a solid $2.18 rise in cutout value as the pork product market extends is two-week rally. Movement was 199.01 loads. However, hog slaughter remains elevated this week, up 5% from a year ago during the first three days of this week. China on Thursday confirmed a new outbreak of African swine fever in the Guangxi Autonomous Region, in the country's south, as the highly contagious disease spreads through the world's largest hog herd.  

Cattle:  Fed cattle futures closed slightly to moderately higher and in the upper half of today’s trading range. April was up 5 cents at $128.95 and June gained 72.5 cents to $120.35. Feeder cattle futures posted strong gains, led by the front-month March. Prices ended higher after a mixed to lower start on strength in beef and talk of steady-to-higher cash markets this week. Midday wholesale beef prices rose again, with Choice up 68 cents and Select gaining 11 cents. Sales were moderately active. Packer margins are estimated at $82.75 per head, up from $74.05 a week ago, according to HedgersEdge.com. Grilling season may be delayed by the wintry weather, but grocers are already beginning to increase buying for 90 days in the future. The actual federally inspected slaughter for week ended Feb.23 showed slaughter fell to 581,376 from 607,595 a week earlier but up from 574,954 a year ago. However, that week tends to be the smallest non-holiday week of any year. The carcass weight data was supportive, with steer carcasses weighing 874 lbs., down 5 lbs. from the prior week and 9 lbs. lighter than a year ago. Lighter carcass weights mean it will take bigger kills to produce the same tonnage. Stronger fat cattle and sharp losses in corn boosted demand for feeders.  

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