After the Bell: Small Gains on China Bean Purchases Ahead of USDA Reports

Posted on 02/05/2019 2:29 PM

Corn:  Nearby futures prices closed up 1 to 1 1/2 cents in the nearby contracts today, in more subdued and range-bound trading action. Corn traders are waiting for a fundamental spark to push prices out of the recent sideways trading range. Maybe such news will occur Friday morning with the USDA flurry of updates on 2018 production, Dec. 1 inventories and world supply and demand projections. Slower ethanol production may lead to USDA cutting its corn usage forecast in Friday’s reports. Processors used 454.5 million bu. of corn to make ethanol in November, according to USDA. Ethanol grind declined 5.6 million bu. (1.2%) from October and 21.2 million bu. (4.5%) from November 2017. Corn-for-ethanol grind in the first quarter of the 2018-19 marketing year was 1.360 billion bu., down 31 million bu. (2.2%) from last year. Scattered but heavy rains will begin to ease drought conditions for the second-season corn crop in areas of central Brazil as planting continues to advance. Dry weather is expected to aid saturated corn fields across Argentina until some showers return this weekend. Corn traders will be listening for President Trump to mention any additional details on China trade during this evening’s annual State of the Union address to Congress.

Soybeans: Soybeans ended slightly higher and in the upper quarter of today’s narrow trading ranges. March beans rose 1 ¾ cents to close at $9.20 1/4 and November was up 2 1/2 cents at $9.60 ½. March meal lost $1.10 and March oil gained 25 points, pushing oil’s share of the crush to near 33%. The market is finding limited support from USDA confirming Chinese buying of U.S. soybeans the past two mornings. Nonetheless, it would not be surprising to see more sales announced in the near term to meet the Chinese commitments to buy 5 million metric tons as part of its negotiations last week in Washington. There is also some trepidation from the bears that have sold rallies since the Dec. 1 trade truce, ahead of tonight’s State of the Union speech by President Trump, where he could announce more buying details. Today USDA confirmed private exporter sales of 2.603 MMT of U.S. soybeans to China for delivery in 2018-19. That is the third largest daily sales announcement since records began. Paired with Monday’s sale, this brings total sales registered with USDA to 3.2 MMT. USDA also reported this morning 274,000 MT of beans were sold to unknown destinations for delivery by Aug. 31. USDA will likely cut its forecast for Brazil’s soybean crop in Friday’s WASDE report. Most are looking for a number in the 113 MMT to 116 MMT range, down from 122 MMT estimated in December. Still that report is likely to show record U.S. and world inventories, another reason for bears to remain in a “sell the rally” mode. Weather remains supportive to stabilizing yields in Brazil and supporting stronger output in Argentina. Soy harvest in Parana, Brazil’s second-biggest grower, was 25% done this week, compared with zero last year, state researcher Deral said today. Last month the agency cut its crop forecast 12% to 16.8 MMT, from 19.1 MMT in December.

Wheat:  Winter wheat futures finished mostly lower, with strength only in the front months as SRW March closed up 1 ½ cents to $5.27 ¼. Spring wheat was narrowly mixed. Basis bids are rising, and futures spreads are narrowing, which are signs that buyers are under the market looking to extend coverage. Cash markets lead futures out of bear markets and those two trends have been occurring for the last two months. That means there may a bullish surprise or two in the Feb. 8 USDA reports on inventories and U.S. winter wheat acreage. Traders have history of over-estimating winter seedings in the past. Wheat inventories in Canada at the end of December fell 0.2% to 23.233 MMT, according to Statistics Canada. Excluding durum, wheat supplies were down 3.5% to 17.095 MMT. Jordan purchased 60,000 MT of optional-origin wheat overnight in a tender seeking 120,000 MT. Traders are becoming impatient as to when U.S. wheat will find its way into more overseas tenders. It will be interesting to see how USDA adjusts its world wheat trade forecasts Friday. Rising world prices, amid active global buying of mostly Black Sea and east-European supplies, suggests there is still a large volume of global wheat buying that could come for U.S. wheat for delivery before new-crops supplies are available.

Cotton: Cotton futures finished with gains of 30 to 64 points, which was in the upper end of today’s range but off session highs. Cotton futures didn’t have a fundamental reason for today’s price strength. In fact, the limited news that was available was mostly price-negative. The bulk of today’s strength was tied to corrective buying amid ideas selling the past couple days was overdone. Price action is likely to be relatively quiet the next couple of days as traders prepare for Friday’s Crop Production and Supply & Demand Reports. While there isn’t expected to be any major market-moving news in the reports, it’s also unlikely traders will add new positions ahead of their release.

HogsFebruary lean hog futures closed down 95 cents and the April and June contracts lost $1.45 and $1.20, respectively. Prices closed near the session low, with April futures taking back about half of Monday’s solid gains. Worries persist regarding large hog slaughter numbers coming to market until mid-February. Weaker cash hog prices today also weighed on the futures market. There are ideas hog marketings are still backed up by last week’s plant reductions due to bitterly cold temps and snow-covered roads. Wholesale pork carcass prices fell 34 cents today, led down by lower ham and belly prices. Movement was 216.37 loads. Traders will be listening to see if President Trump will mention the U.S.-China trade dispute and perceived progress during this evening’s annual State of the Union address.

Cattle:  February live cattle closed up $1.075, with April and June contracts up 75 and 47 1/2 cents, respectively. Prices closed near the daily highs. Feeder cattle futures were down 7 1/2 cents in the March and off 20 cents in the May contract. Choice boxed beef prices fell 26 cents today, while Select was up 28 cents, with movement light at only 66 loads on the day. Choice beef prices surged $3.39 Monday. Unless wholesale beef trade is strong enough to encourage packers to raise bids, cash cattle prices this week are expected to be steady to weaker than last week’s $123.87 average. Cattle numbers should begin to seasonally slide, but it looks like there may be more than enough market-ready supplies this week and that could weigh on packer bids amid the light beef sales to start this week. Still, underlying demand for beef is expected to be good into the middle of the summer grilling season.

 

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