After the Bell: Grains Rally on Bargain Buying; Beans Retreat

Posted on 03/05/2019 3:20 PM

CornFutures favored the upside in two-sided trade today, with futures ultimately settling 1 to 2 cents higher for the day.  Corn spent the day trading within Monday’s trading range as the market had little reason to push futures far in either direction. Traders are growing tired of U.S./China updates and continued talk of big Chinese purchases without any developing or more concrete details being released. With that said, the market may continue to move sideways leading up to USDA’s Supply & Demand Report Friday. South American updates are still acting as a damper on buying interest. South American Crop Consultant Dr. Michael Cordonnier raised both his Brazilian and Argentine corn crop estimates today.  

Soybeans: Soybean futures finished with gains of 1 1/4 to 2 1/4 cents through the March 2020 contract, which was near midrange. Meal futures ended mostly 50 to 70 cents lower. Soyoil futures finished mostly 4 to 6 points lower. Traders have grown impatient waiting on a U.S./China trade deal to be finalized. In addition, it has now been seven market days without any daily sales to China since USDA Secretary Sonny Perdue said Beijing agreed to buy an additional 10 MMT of U.S. soybeans. We still believe a completed U.S./China trade deal would give the market a price boost, but the longer it takes to get a deal announced, the less impact there’s likely to be. South American weather remains generally favorable, which is also limiting buying interest in the soybean market.  

Wheat: Winter wheat futures ended the day 7 to 9 3/4 cents higher and nearer their daily highs. Short covering from recent strong selling pressure was featured. Futures prices last week hit contract lows. Spring wheat futures closed 1 to 4 cents higher. Wheat futures prices today were supported on ideas the recent sharp drop in prices will make U.S. exports more competitive on the world market. Still, strong new U.S. business is elusive at present. Given the expansion of speculative funds’ net-short positions in SRW and HRW wheat futures in recent weeks, last week’s lows could prove to be intermediate support levels until more is known about this year’s U.S. crop in early April. Wheat traders are looking ahead to Friday’s monthly USDA supply and demand report (WASDE) for March. U.S. wheat ending stocks in 2018-19 are forecast at 1.024 billion bushels, on average from the trade guesses, according to a Dow Jones Newswires survey. That’s slightly up from the February USDA figure of 1.010 billion bushels. World wheat stocks are seen virtually unchanged in the March report, from the February reading of 267.5 million metric tons.

Cotton: Cotton futures scored solid gains today and closed near their daily highs, with the nearby contracts gaining 136 to 148 points. Nearby contracts also closed at four-week highs. Short covering in the futures market was featured in cotton today. The recent rally in the U.S. stock market that has the major indexes at or near multi-month highs is a bullish underlying element for the cotton market. On the U.S.-China trade front, the read from traders is generally friendly for the cotton market, but traders want specifics on amounts of U.S. ag products China intends to purchase. The “bonanza” levels of purchases of a growing list of U.S. farm products that have been conjectured would normally shoot prices higher. But the “news” has been bandied about so frequently and with ever-higher numbers traders appear to be immune to the talk, if not downright skeptical. Cotton traders are awaiting Thursday morning’s weekly USDA export sales report and Friday morning’s monthly USDA supply and demand report for March.

HogsLean hog futures pushed to their highest level in two weeks today, but futures settled mid- to low-range with gains ranging from 17 ½ cents to $1.125. The June and July contracts led gains. The market extended the rebound off the Feb. 20 contract low today, but today marked the eight consecutive day where the market was only able to close mid- to low-range. That speaks to traders’ caution toward the long side of the market after the punishing breakdown in recent months amid big slaughter numbers. Those numbers have recently started to retreat and should continue to do so near-term. This should eventually translate to cash market strength, which would in turn make traders more comfortable pushing futures higher. The April contract currently holds just shy of a $6 premium to the cash hog index. Meanwhile, African swine fever in China and Vietnam remains a source of underlying support, as this could eventually heighten these nations’ import needs. But traders are growing weary waiting for that to occur.  

Cattle:  Live cattle closed mixed and feeders ended lower. April live cattle rose 47 1/2 cents to close at $128.825 and June gained 5 cents to $118.85. Beef prices continued to climb at midday, with Choice up 80 cents and Select gaining 74 cents on moderately active sales. Choice beef is now the highest since June and headed for its spring highs, which could be as much as $10 higher if poor feedlot conditions across northern areas don’t improve. There was a small sale of cattle in Nebraska Monday at steady money to last Friday’s $3 higher trades. Volume last week was up sharply from a week earlier and included increasing numbers of forward-contracted cattle as well. Slaughter was 120,000 head today, up from 118,000 a week ago and 116,000 a year ago. The market wants to see the Feb. 1 Cattle on Feed Report set for release on Friday, two-weeks late because of the government shutdown. Most are looking for a 5% to 7% drop in placements and an increase in January marketings from a year ago that could leave overall numbers in feedyards little changed from a year ago.  

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