After the Bell: Soybeans, Grains Retreat Ahead of USDA's Supply & Demand Report

Posted on 10/10/2018 2:35 PM

Corn: Corn futures faced light pressure for much of the day and the market settled low-range and down 1 1/4 to 1 3/4 cents. Today’s close was the lowest since late September. Corn futures have moved sideways to lower this week as traders geared up for USDA’s Supply & Demand and Crop Production Reports that will be released tomorrow. The reports are expected to include higher production and carryover estimates for the U.S. and the data will not reflect any damage from recent heavy rains in the Midwest. The heavy rains have led to the closure of some locks along the Mississippi River and stalled harvest at a time when export demand is quite high. But for now, traders’ attention is on supply. To that end, analysts continue to call for a big rebound in Brazil’s corn crop this season. Conab and USDA will both update their official crop estimates for the country tomorrow. 

Soybeans: Soybean futures settled 10 to 10 3/4 cents lower through the August contract and finished in the lower third of today’s range. Front-month November futures led today’s price decline, touching the lowest since Oct. 1. December meal futures fell $2.10 with December soybean oil declining 33 points.  Expectations for USDA to raise its record production and carryover forecasts in Thursday’s monthly updates and concerns the trade war between the U.S. and China is escalating weighed on soybean futures today. Until now, the rest of the world has been keeping U.S. export demand relatively normal. But with Chinese demand missing, the export pace will slow. Weekly soybean export inspections totaled just 569,776 MT versus 1.491 MMT last year at this time. Total sales commitments for the marketing year that began Sept. 1 are already 13% behind last year’s pace. China sold 101,057 MT of soybeans at an auction of state reserves at an average price of 3,196 yuan per ton, or $12.57 a bushel, the National Grain Trade Center said on Wednesday. China may still have between 6 MMT and 10 MMT of reserves left to sell, depending on how many imported beans were put into government reserves earlier this year. Brazil is out of supplies after shipping record qualities earlier this year.

 

Wheat: Winter wheat futures closed low-range on the day and were down 3 to 4 1/2 cents in the nearby contracts. Spring wheat futures were 1 3/4 cents. Pressuring wheat market prices a bit today was news Russia’s Ministry of Agriculture raised its wheat crop forecast from 64.4 MMT to a range of 68 MMT to 69 MMT. However, Russia is considering releasing 1.5 MMT of wheat reserves into the domestic market, a sign of tightening supplies. Rains are expected to ease drought conditions in eastern Australia over the next week, but the precip may be too late to aid a significant percentage of the winter wheat. Rain should also ease drought in France. However, the central and eastern EU, Russia and Ukraine will be dry and mild for next 10 days to slow germination and development. Light rain or snow is expected for the Canada Prairies Friday and Saturday, after which a period of warmer and drier weather should aid spring wheat collection.Wheat market traders are awaiting Thursday morning’s USDA monthly supply and demand report. While no big changes are seen in the government’s monthly U.S. and world wheat numbers, any surprises seen in the corn and soybean figures that move those markets are likely to find spill over action into the wheat market.  

 

Cotton: Cotton futures settled 2 to 21 points lower through the October 2019 contract. Futures finished midrange and just slightly below opening levels. Price action was light and choppy in the cotton market today, as traders evened positions ahead of Thursday’s USDA Crop Production and Supply & Demand Reports. While traders aren’t anticipating any major changes to USDA’s cotton crop or ending stocks forecasts, they weren’t willing to add new positions. We anticipate more light and choppy trade ahead of USDA’s 11 a.m. CT reports. Price action after that will be dictated by the report data. There are multiple weather threats to the U.S. cotton crop, as Hurricane Michael rips through the Southeast, while cold temps threaten to shut down late-maturing cotton in areas of Texas. Tomorrow’s report obviously won’t catch any of this damage, so traders may immediately assume a smaller crop estimate is coming in November. Offsetting the crop concerns were unconfirmed reports China issued more import quotas for cotton, excluding U.S. supplies. While it appears China’s cotton appetite is building after years of drawing down state-owned reserves, the trade war with the U.S. will have importers turning to other countries to fill the bulk of those needs.

Hogs: Lean hog futures closed lower, with the soon-to-expire October contract down 32 1/2 cents and the December off 45 cents. February futures were down $1.025. All contracts ended low-range on the day. Mild pressure today came on news Chinese officials reportedly have lifted restrictions related to African swine fever in an eastern province. A North Carolina processing facility continues to report mechanical problems, which will limit hog demand locally but may lead to production increases elsewhere.Cash hog prices firmed 8 cents yesterday, according to USDA. However, the Lean Hog Index is projected to move lower. Most futures contracts, however, remain well under the cash hog index, which limited pressure.The noon USDA pork report showed carcass cutout value up 55 cents, led by gains in hams, ribs and bellies. Pork movement was solid at 200.92 loads.

Cattle: Live cattle futures closed in the bottom half of their daily price ranges, led to the downside by the nearby October futures, which settled down $1.275. December cattle fell 67 ½ cents to $116.475. Feeder cattle futures paced the declines today, dropping $1.10 to $1.775. Cattle opened lower as 63 loads of cattle were tendered against the soon-to-expire and premium-priced October contract.  Talk about packers planning for a smaller Saturday kill also weighed on futures today. Cash cattle have been trading in the $110 to $111 range for the past three weeks, very close to the $111 cash price a year ago. Packers are probably getting closer to having to buy on the open market next week after using up contracts the last couple of weeks. Slaughter the first three days of this week was estimated at 348,000 head, down 10,000 from a week ago and 4,000 head smaller than a year ago. Choice boxed beef values are trading near their lowest levels in a year, but that is countered by lighter kill numbers and steer weights of late that ease supply concerns that have plagued the market over the past year. Choice cutout at midday was down 56 cents to $202.29, up from about $197.50 a year ago, thanks in part to strong domestic and export demand.

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