After the Bell: Grains, Soy Pare Weekly Gains Ahead of USDA Report Next Week

Posted on 04/05/2019 3:14 PM

Corn: Corn futures dropped 2 1/4 to 3 1/4 cents today, but still posted gains for the week. May corn futures firmed 6 cents this week, while December futures rose 5 1/4 cents. Funds covered some of their record short position in the corn market this week. The market may be supported by additional corrective buying next week, but there’s no reason for funds to be spooked out of their shorts. And it’s possible any move higher could be met with a fresh wave of farmer selling. USDA’s Supply & Demand Report on Tuesday is likely to push old-crop ending stocks up near 2 billion bushels. The forecast doesn’t look promising for much fieldwork in April. While a slow planting pace could keep farmers from planting all of the intended corn acres, it’s unlikely the market will get too concerned with too much spring precip. Recent years have conditioned the market to assume plentiful spring moisture is a longer-term positive for corn yields and production.

Soybeans: Soybean futures faced pressure at week’s end and settled 6 ¼ to 7 ½ cents lower through the January contract. But the market still posted gains for the week, with the May contract up 14 ¾ cents. Soymeal and soyoil futures also faced pressure at week’s end, but they also finished with solid gains for the week. Attention next week will be on USDA’s monthly supply and demand update. The report is expected to show little change in USDA’s burdensome U.S. carryover estimate, but USDA is expected to make some adjustments to its South American crop estimates. Traders expect USDA to go down on Brazil and up on Argentina. The other watchpoint is the weather. Snow melt in northern states has been more gradual than feared, but a wet pattern the next two weeks, along with some cool temperatures, is not conducive for planting or fieldwork. This could shift some acres to soybeans.  President Donald Trump this week said he should know whether U.S./China trade deal can be reached in the next four weeks, but negotiators say they would likely need another two weeks to read the fine print. Whether a deal is reached and whether it includes big Chinese commitments to buy U.S. soybeans will continue to dominate the market’s attention—even in the midst of planting season. 

Wheat: Wheat futures end lower Friday, with winter wheat contracts paring this week’s gain. Spring wheat futures fell to new contract lows on Friday. May SRW futures fell 3 cents to close at $4.67 ¾, with May HRW falling 8 ¼ cents to $4.31 ¼.  SRW futures gained about 10 cents and HRW gained a penny. Spring wheat futures fell more than 30 cents this week. After recent improvement, the focus next week will be on weekly export shipments on Monday and new sales in Thursday. In between, the USDA updates supply and demand forecasts with traders looking for another 50-million-bu. increase in the U.S. carryover forecast, signaling a burdensome supply situation. A surge of cold air is expected to drop south into the middle of the country next week. It too early to say how far south the frost and freeze line will fall. The wheat crop is just beginning to move from the vegetative to the early reproduction phase of development, increasing the risks to yields.  Most wheat as of today was expected to avoid the most damaging cold temperatures. Rhetoric coming from this week’s U.S/Chinese trade negotiations has been pointing to progress, but issues remain. White House officials continue to try to get language that will hold China to any commitments or face significant consequences. One Chinese forecasting firm said this week that China may need to import 12 million metric tons of wheat next season, up from about 5 million this year. There have been reports that 7 MMT difference could be U.S. supplies.

Cotton:  Cotton futures posted gains of 38 to 93 points through the December contract. For the week, May cotton firmed 64 points and December futures rose 149 points. Bulls carry momentum into next week’s trade. USDA’s Supply & Demand Report on Tuesday will likely set the price tone. A special focus will be on the old-crop export forecast. With shipments running behind the pace needed to hit USDA’s current export target, we wouldn’t be surprised to see a reduction and a bigger carryover estimate.  March cotton planting intentions came in much smaller than we anticipated, based on our farmer survey. If December cotton futures continue to push higher, there’s a strong chance cotton acreage will end up higher than March intentions. Flooding in the Delta could limit cotton acreage there, but Texas weather is favorable for planting. Like nearly every other market, cotton traders are closely monitoring the U.S./China trade negotiations.  

Hogs: Futures closed mixed to higher Friday and sharply higher this week, reaching new highs in some several contracts. June futures rose on Friday to close at $98.975, up $10.425 for the week. Both July and August closed above the $100 barrier today. Estimated slaughter fell to an estimated 2.458 million head this week, compared with 2.504 million last week. However, slaughter was still up 124,000 head, or 5.3% from a year ago. Supplies remain heavy. With cash prices rising fast than pork values the past month, packer margins are back to breakeven or slightly in the red for the first time since last June. That could lead to a slowdown in the cash hog rally without an improvement in domestic and export demand. Midday pork cutout values rose 74 cents to $80.56 and sales were strong. Bellies are up more than 50% since the end of February. With June futures closing at more than a $20 premium to the CME cash index today, that means the market will need to see further strong gains in cash prices to sustain the rally. This week’s U.S./Chinese trade talks did not result in a date for a summit to sign a new deal. Each Thursday’s weekly USDA export sales report will be scrutinized for Chinese buying of U.S. pork.

Cattle: Live cattle futures finished as much as $1.50 lower today as the market gave back much of yesterday’s strong gains. April futures led today’s price drop. Feeder cattle futures finished mixed to mostly lower today. June live cattle futures firmed $1.35 this week, despite today’s losses. May feeder cattle futures firmed $1.45 for the week. The voracity of the storm headed toward the country’s midsection will guide price action next week. Today’s price pressure was partly tied to forecasts easing a bit. If the storm carries more punch than currently anticipated, traders could be quick to push futures higher. If the storm doesn’t cause major stress, price direction will come from the cash and product markets. We are interested in hedging a strong push to the upside. Retailer buying ahead of the grilling season should keep the product market relatively well supported. Seasonally, boxed beef prices typically post their seasonal peak sometime during late spring/early summer. The cash market typically peaks about the same time. After those seasonal peaks, prices typically slide through late summer/early fall. That’s why we are interested in hedging the next push to the upside.

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