After the Bell: Soybeans Jump to Highest Since August on Better Demand, U.S. Crop Damage

Posted on 10/15/2018 2:50 PM

Corn: Corn futures faced some pressure overnight, but during the day trading session buyers took control and helped the market to finish at its highest level since mid-August with gains of 4 ½ cents through the July contract. Corn futures got a lift today from concerns that too much precip in the Midwest (including both rain and snow) could leave bushels in the field. The outlook is drier over the next 11 days, but it will take fields time to dry down, especially with cool temperatures likely near-term. Today’s gains can also be attributed to spillover support from the soybean market, which posted a strong, 20-plus cent rally in response to supportive demand news. Gains were limited to some degree by a disappointing tally in today’s export inspections report. Sales of 996,643 MT the week ending Oct. 11 fell short of expectations and were down notably from the week prior. But inspections are still running an impressive 74.7% ahead of year-ago levels.

Soybeans: Soybean futures enjoyed follow-through buying to start this week, capping a third day of gains as prices rose to the highest in almost eight weeks. January soybeans gained 24 cents to close at $9.05 3/4.  December soybean meal gained $10.10 to close at $327 while December soyoil climbed 37 points to 29.76 cents. Soybeans continued to find support from speculation that U.S. production is likely to fall below last week’s USDA estimate because of field losses from excessive rains and even some snow the past three weeks. Funds were still net short over 41,000 contacts of futures and options as of Oct. 9, according to CFTC data released Friday. Gains accelerated at midmorning after USDA reported weekly soybean export inspections totaled nearly 1.158 MMT in the week ended Oct. 11, nearly double the prior week’s showing and much stronger than expected. More important were shipments to China from both the Gulf export terminal and the Pacific Northwest. Additional shipments from the PNW went to Taiwan and Vietnam. With Brazil and Argentina nearly sold out on last year’s crop, this could be a sign of improving demand that would help to firm basis in the western Midwest for rail loadings. Argentina also was an interesting destination for U.S. soybeans last week from Gulf terminals. A second boost to prices occurred following the release of the September soybean crush data from the National Oilseed Processors Association an hour later. The NOPA’s September soybean crush report showed 160.779 million bu. of soybeans crushed last month, toppling expectations by 3.373 million bu. and smashing the previous September record by nearly 21 million bushels. Soymeal exports during September climbed to 785,267 MT, up sharply from the 487,397 MT shipped in September 2017.

Wheat: Winter wheat contracts gained 6 to 7 3/4 cents in nearby futures, closed at multi-week high closes, and finished high-range on the day.  Spring wheat closed 4 1/2 to 7 cents higher. Good gains in soybeans and corn futures spilled over into some buying interest in the wheat markets today. Funds were covering some of the net-short positions that expanded to 16,885 futures and options contracts as of Oct. 9, up from 12,099 a week earlier, data from the CFTC showed on Friday. Net- short positions were the largest since late April as of last week. Weather is a mixed bag for wheat price direction early this week. Cold, wet conditions are curbing planting and development of U.S. winter wheat crops. Recent rains and light showers provided only limited benefit to the Australian wheat crop, which is seeing yield losses. And in Argentina, about a third of the wheat belt is too dry after recent storms stayed either south or northeast of main growing region. A drying trend in northern China is an increasing concern for winter wheat emergence and development ahead of cold weather. Weekend harvest delays should end in Canada with dry, cool weather expected the next two weeks. Meanwhile, today’s weekly USDA export inspections report showed wheat shipments of 450,980 MT, near the upper end of expectations but still showing overall lackluster demand for U.S. wheat. However, if today’s shipments totals can be met, or close to it, in the coming weeks--during a generally slow period of U.S. exports—it would be indicative of U.S. wheat prices becoming more competitive on the world market.

Cotton: Futures added to strong gains on Friday, reaching the highest since Sept. 26. December cotton rose 35 points to settle at 78.72 cents. Prices rose on damage to the Georgia crop with producers reporting losses of 25% to a total loss from remnants of Hurricane Michael. Some trade sources are estimating as much as 400,000 bales may be lost in Georgia. Last Friday, there was talk that as much as 1 million bales were lost or damaged in the region. President Trump issued a disaster declaration for Georgia on Sunday for several counties in the path of Michael. The U.S. crop may be significantly smaller than the current forecast, curbing global supplies. Last week, USDA said the global carryover is now seen at 74.45 million bales, down from 80.89 million last season. China announced Sunday that its import quota for 2019 will be 894,000 bales, unchanged from this year. Reports last week that the White House was moving ahead with plans for President Donald Trump and China leader Xi Jinping to meet at the Group of 20 meetings at the end of November in Argentina continued to provide light support. Details or confirmation of a meeting and the eventual outcome of any talks will be keys in price direction into year end.

HogsLean hog futures enjoyed solid gains throughout the day. Futures ultimately finished 92 ½ cents to $1.75 higher for the day, which was in the upper-end of the day’s range but down from session highs. Hog futures were lifted today by news from China that African swine fever had been detected at a large hog farm with nearly 20,000 animals, in addition to at two smaller farms in the vicinity. These latest instances add to a string of reports about the spread of the virus, signaling the situation is far from under control. USDA did state it plans to approve a license for Zoetis Inc. to market a vaccine for ASF, but this approval process will take time. Support also stemmed from the double-digit discount the lead December contract holds to the cash hog index, as well as a strong start to the week for the pork cutout value. It gained $1.76 this morning, pushing it back above the $80 threshold thanks to strong gains in butts, picnics, hams and bellies.

Cattle: Cattle closed solidly higher and near their session highs today, with December futures gaining $1.97 and the February contract up $1.50. Notions that snowfall in the Midwest and Plains states the past few days will slow down weight gains in cattle in those regions was friendly for the futures markets today. In the coming days producers will also be dealing with muddy pens that will further inhibit vigor in their animals. Solid U.S. economic growth remains a bullish underlying factor for the cattle markets, as consumers with higher incomes will purchase more beef at the meat counter. Boxed beef values were mixed again today with Choice up $1.48 and Select off 61 cents. Movement was light at 51 loads. Traders are awaiting Friday’s Cattle On Feed Report, where traders expect USDA to report record feedlot inventories as of Oct. 1.


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