Corn: Corn prices grinded lower to close near session lows and hit new contract lows. December corn fell 4 ¾ cents to close at $3.43 ¼. Prices started lower overnight after the U.S. announced new tariffs on $200 billion worth of Chinese goods and continued under pressure today as China planned retaliatory levies on $60 billion of U.S. products. Early Midwest yield results are coming in variable but generally very good, confirming a big crop. Rains will spread from north to south the next several days and may slow harvesting, but not cause large field losses. The projection of record U.S. yields allowed buyers to step away from the market and wait for prices to come down to even more attractive levels. Prices still look undervalued as world inventories are projected for fall sharply for a second year despite record U.S. production. So, demand continues to grow more quickly than supply. Informa Economics IEG reportedly projected a sharp gain in U.S. 2019 corn plantings to 93.044 million acres, which would be up from USDA's estimate of 89.1 million acres this year.
Soybeans: Soybean futures contracts ended down generally 8 to 9 cents today, nearer their session lows, posting contract lows and scoring new 10-year lows. Soybean meal futures also posted contract lows today, with December meal down $2.40. Soybean oil also dropped to new contract lows and were down 33 points in the December contract. Heightened U.S./China trade tensions and increasing harvest activity in the U.S. Corn Belt were the main negatives in the bean market today. We are hearing some incredible soybean yields from early harvest results, which suggest USDA’s record yield estimate could increase. As a result, soybean futures may continue to bleed lower, with at least 50 cents more near-term downside risk. President Donald Trump followed through on his promise to increase Chinese tariffs. The White House announced a new 10% tax on over 5,000 products from China that will take effect Sept. 24, with those tariffs rising to 25% on Jan. 1, if a trade deal isn’t reached by then. China will levy tariffs on about $60 billion worth of U.S. goods in retaliation. Also bearish are rains that are boosting the soil moisture profile as South America soybean planting gets underway. Early planting efforts in Brazil are well ahead of last year. Informa Economics IEG reportedly projected a drop in U.S. 2019 soybean plantings to 82.27 million acres, which would be down from USDA's estimate of 89.6 million acres this year.
Wheat: Wheat futures finished mostly 1 to 4 cents higher in SRW contracts, 2 to 4 cents higher in HRW contracts and 3 to 5 cents higher in HRS contracts. The winter wheat markets closed near midrange, while spring wheat futures ended high-range. Wheat futures ignored the selling the corn and soybean markets and instead worked higher amid corrective buying. Fundamental support came from news Russia’s ag ministry says wheat exports for 2018-19 will be around 30 MMT, which would be down from USDA’s forecast last week of 35 MMT. However, most traders expect some sort of export curb to be put into place when Russian wheat exports reach around 25 MMT. Concerns over impacts from a weekend frost in Western Australia were also mildly supportive. It’s going to be difficult for wheat to find sustained buyer interest if corn and soybeans continue to bleed lower during harvest, however. The wheat market needs strong export demand to surface if it’s going to “divorce” itself from the other markets. We don’t see that happening near-term, as export demand for U.S. wheat is unlikely to pick up enough to support a sustained price recovery until Russian exports slow from the current record pace.
Cotton: Cotton futures closed sharply lower, near their daily lows and hit 4.5-month lows today. December cotton closed down 279 points at 78.52 cents. It appears an all-out trade war is erupting between the U.S. and China, and that hit the raw commodity sector hard today—especially cotton. The U.S. announced 10% tariffs on another $200 billion on Chinese goods, with the percentage going to 25% if an agreement is not reached by the end of this calendar year. That means nearly half of all Chinese imports into the U.S. will soon face levies. And if Trump follows through on his next threat, all Chinese imports would be hit. China has pledged to retaliate with $60 billion in new tariffs or increased levels for existing rates being applied to U.S. products. Other retaliatory measures are likely to include delays in licensing and project approvals, according to officials and trade experts. Heavy rains across the Carolina’s from remnants of Hurricane Florence will see production losses probably small relative to the overall U.S. cotton crop size. In fact, crop condition ratings improved for the latest reporting period. U.S. cotton harvest pressure is picking up steam, with Texas harvest proceeding at a rapid clip.
Hogs: October lean hog futures prices closed up $2.725 at $59.175, the highest close since July 5. The December contract finished $2.60 higher and February rose $1.275. Lean hog futures started higher and continued to move higher throughout the session, with October at one point touching up the $3 limit. The market was supported by further strength in fresh pork prices that is keeping packer margins strong and demand for live animals active. Slaughter the first two days of this week is down 64,000 head from a year ago as operations remain limited in North Carolina as companies continue to clean up after Hurricane Florence rambled through the state last weekend. Today’s rally was led by the front months, a sign that demand for pork is on the rise. China did not report any additional cases of African swine fever today. Still, the government asked local authorities on Monday to secure adequate pork supplies ahead of the October holidays. Today’s rally in the face of new U.S. and Chinese tariffs argues that the hog market expects increasing Chinese demand for imported pork, whether it is U.S. or other origin.
Cattle: Live cattle futures saw two-sided trade at times today, but futures ultimately ended midrange and 12 ½ to 45 cents lower. Feeder cattle futures faced a bit heavier pressure today and posted losses of $1.15 to $1.50 through the November contract. These finishes represented a low-range close for most contracts. Cattle futures set back again today amid some additional profit-taking in the wake of Friday’s surge to the upside. Futures’ premium to last week’s cash action and a higher U.S. dollar index were encouraging to that end. But the trend of the market remains up and traders are optimistic about this week’s cash cattle action. Adding to that optimism were some early week sales in the Nebraska market at $111.50, steady with the upper end of last week’s trade. This could be a harbinger of higher prices to come. Boxed beef prices were mixed this morning, continuing the recent lackluster performance of the market. The recent price rise for pork has likely shifted some attention away from aggressive beef featuring, to the detriment of the boxed beef market.