After the Bell: Soybeans Finish Firm as Grains Retreat to End Week

Posted on 11/09/2018 2:29 PM

Corn:  December corn fell 3 ¾ cents to close at $3.69 ¾ on Friday, capping a weekly decline of 1 ½ cents. Yesterday, prices touched the highest since Aug. 20. That high at $3.79 is now key resistance after prices were able to hold above the 40-day and 100-day moving averages this week.  Overall the November USDA WASDE report was slightly positive for the price outlook despite the whipsaw price action of the past two days. USDA trimmed its U.S. yield and crop forecasts more than traders expected. In six of the past eight times since 1993 that USDA cut production from October to November, the final estimate in January was cut.  The main factor that weighed on prices to end the week was the confusing new data on Chinese supplies. The USDA adopted the latest major 10-year revisions on production and use in China that showed a huge increase in output and use. China ending stocks are now pegged at 207.49 MMT, compared with 58.5 MMT estimated last month by USDA. China is not an exporter of corn and now accounts for 67.4% of global carryover. The only way China could export its high-priced corn would be to use subsidies that are outlawed by the World Trade Organization. More important, world stockpiles less China were down about 830,000 MT from a month ago, a tightening situation and long-term bullish.

Soybeans: Nearby soybean futures closed up 7 3/4 to 8 cents today and finished near their daily highs. For the week, January soybeans gained 1 1/4 cents. Meal prices ended near steady today, while bean oil lost around 40 points on the day. Today’s gains in soybean futures suggest there will be some more follow-through technical buying interest on Monday morning.The market saw support from U.S./Chinese diplomatic talks in Washington today on security that may also have included discussion on resolving the trade war between the two countries ahead of a planned meeting between U.S. President Donald Trump and Chinese President Xi Jinping at the G20 in Argentina at the end of November. Traders next week will be looking for fresh news on this very important matter. Rallies in soybeans are likely to be capped after USDA on Thursday further increased its projection for record U.S. and world inventories before the 2019 harvests. World soybean production is seen outpacing demand by 4.4%.  

Wheat: Winter wheat futures closed down 5 1/2 to 10 1/2 cents today, with HRW leading the selling pressure. March HRW futures dropped to a nine-month low today. Spring wheat closed 6 ¾ to 7 ¾ lower. For the week, December HRW futures lost 17 3/4 cents. December SRW futures were down 6 1/4 cents on the week. Today’s bearish, low weekly closes in the winter wheat futures markets suggest some more follow-through selling pressure on Monday morning. The market will likely remain under some pressure next week from USDA forecasting a smaller-than-expected decline in world inventories in Thursday’s monthly update. Cold weather across the U.S. Plains states is pushing planting beyond insurance dates and that may eventually trim the increase in final planted area.  

Cotton:  December cotton futures fell 92 points Friday to close at 78.11 cents a pound, down 70 points for the week. Still, prices remain stuck in a range from the October low at 76.10 to yesterday’s high at 80.50. More choppy trading is expected. Prices will remain supported by USDA confirmation of smaller production and tightening reserve inventories. On Thursday, USDA slashed the U.S. crop by 1.355 million bales and cut ending stocks to 4.3 million bales from 5.0 million in October. New export sales have been slow the past six weeks and included increased Chinese cancelations of prior purchases. Volatile stock prices and a strong dollar may continue to curb rallies.

Hogs:  December lean hogs closed up 17 1/2 cents, while the February contract lost 62 1/2 cents, closing nearer the session low and hit a two-week low today. For the week, February hogs lost $5.30. Friday’s technically bearish, low weekly close in February lean hog futures points to some follow-through technical selling pressure on Monday morning. Pressure on hog futures stems from softer cash and cutout values this week. Overall, pork product prices are off roughly $4.00 this week and dropped to the lowest level since Sept. 13. Hams were trading at the lowest since before 2013 for the time period and that continues to be a drag on cash hog values. African swine fever in China continues be a potentially bullish powder keg for the hog market. China’s Sichuan province – the nation’s largest hog-producing region – has banned all imports of hogs and pork from neighboring regions effective Nov. 8 as China works to impede the spread of the disease.

Cattle: Cattle prices tumbled this week amid weakening wholesale beef prices and steady to weak cash bids. December futures closed at $114.575, down $2.50 this week and the lowest weekly close since Sept. 7. Midday beef prices were slightly lower today with Choice quoted at $215.99, still up from $213.37 a year ago. Packers just did not want to pay the higher asking prices this week as cutout margins fell to $186.60 from $222.25 a week earlier. Slaughter is estimated at 640,000 head, up from 624,000 head a year ago. Wholesale beef demand was good amid the bigger supplies. Much of the selling was funds liquidating long positions as prices fell through support this week. Bears hold the technical advantage going into next week.  Look for another few active weeks of slaughter. But overall supplies are not burdensome relative to demand. Carcass weights are sliding lower and winter is ahead, and that may help to curb total beef production as numbers will be up from a year ago. Beef demand should remain strong with the economy growing at a 3% clip.

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