After the Bell: Corn, Soybeans Rise Ahead of USDA Export Sales Report

Posted on 04/10/2019 2:42 PM

CornCorn futures held to roughly a 2-cent trading range today and ultimately settled ¾ to 2 ¼ cents higher on the day. Traders in the corn market were encouraged by the market’s ability to settle in the upper half of their daily trading range yesterday, especially after USDA on Tuesday hiked its corn carryover estimate a greater-than-anticipated 200 million bushels. The market reaction signals the surge in stocks was factored into prices ahead of the report, as the Quarterly Grain Stocks Report telegraphed a big increase was coming.  Light support also stemmed from the forecast for wet, cool weather the remainder of the week, with big rain and snowfall totals possible for much of the Midwest. This adds to flood concerns in some areas and keeps the possibility of planting delays on traders’ minds. Today’s weekly ethanol production update was encouraging as it showed ethanol production climbed 3,000 barrels per day the week ending April 5 to 1.002 million bpd and stocks fell 799,000 barrels to 23.19 million barrels.  

Soybeans: Soybean futures prices closed up 3 to 4 cents and near their session highs. Meal was up around $1.00 in the nearby contracts and bean oil was up 3 to 4 points. Futures got some support today on news USDA’s daily export sales reporting service announced private exporters sold 133,759 metric tons of beans to unknown destinations for delivery by Aug. 31. On Tuesday, Treasury Secretary Steven Mnuchin said China has committed “significant” orders for U.S. soybeans during a House Financial Services Panel hearing. Also, USDA Secretary Sonny Perdue Tuesday said he hoped “we’ll be able to double and triple those numbers,” referring to U.S. ag exports prior to the trade war with China. Structural issues between the two countries are yet to be settled, he said.  A major spring snowstorm will slam through parts of Nebraska, South Dakota, Minnesota and Wisconsin starting Wednesday, potentially dumping 8-16 inches, or more, of snow. Frequent rain will fall the next 10 days across much of the central U.S. Farmers in those areas are trying to prepare fields for seeding of spring crops including corn. It’s still early, but grain traders are pondering any changes in farmer planting intentions due to unfavorable weather. Traders will closely watch Thursday morning’s weekly USDA export sales report. Current marketing-year sales are seen at 800,000 to 1.15 million metric tons in the latest reporting week. In the 2019-20 marketing year, sales are seen at zero to 100 ,000 MT.

Wheat: Winter wheat futures closed 1 ½ to 2 ½ cents lower, while spring wheat jumped 5 to 7 cents. Winter wheat futures remained under pressure from the higher USDA carryover forecast on Tuesday. The agency raised carryover 32 million bu. to 1.086 billion bu. based on reduced exports and feed consumption. Traders are looking for a drop in weekly export business when USDA updates for the week ended April 4 on Thursday. Traders polled by Reuters forecast 300,000 to 500,000 metric tons (MT) in old-crop sales, down from 704,724 MT a week earlier. New-crop sales seen at 100,000 to 200,000 MT, down from 312,816 MT a week earlier. Spring wheat futures rose as a record April winter storm will increase flooding and saturate soils, delaying planting progress for at least a couple of weeks before a possible shift to drier conditions develops. Some underlying support developed on speculation that China is under growing pressure to reach a new trade deal with the U.S., leading to potential new purchases of U.S. wheat. Treasury Secretary Robert Mnuchin told CNBC today that enforcement mechanisms for a deal have been agreed to by both sides. Meanwhile, two days before Chinese Premier Li Keqiang boarded the flight from Beijing for Brussels to attend Tuesday's annual summit with European Union leaders, his team of diplomats was desperate, according to a report today by South China Morning Post. They were struggling to get their EU counterparts back to the table to agree on a joint statement to be released at the end of the meeting. The two sides were able to draft a joint statement at the last minute, but not before European negotiators initially threatened to walk out from the discussions. EU negotiators are growing impatient with China's lack of solid promises or follow-through on when and how it would deliver the market reforms the EU had been waiting for years to see.

Cotton: Cotton futures settled slightly lower in old-crop contracts, while new-crop contracts posted mild gains. Two-sided trade was seen in the cotton market today. Mild followthrough selling was seen in the lead May contract as traders continued to react to the mild 100,000-bale increase in the U.S. cotton ending stocks projection from USDA yesterday. But the fact seller interest was light both yesterday and today suggests it was mostly corrective in nature. Since corrections often come in three-day waves, another day of pressure is possible Thursday. Tomorrow’s price action will in part be guided by USDA’s weekly export sales data. While much of the focus will be on export sales, we are most interested in weekly shipments as that will determine if old-crop cotton business can get to USDA’s forecast. A weekly average of nearly 400,000 bales is needed to get to USDA’s export figure of 15 million bales.

Hogs: Lean hog futures prices closed up $1.20 in the June and $1.375 higher in the July contract, and near the daily highs. The lean hog futures market will remain volatile and a gunslinger’s trading affair as market participants wait for fresh news on the ASF situation in China and on U.S/China trade talks. South Africa says it has detected ASF on a farm in a northwest province, the World Organization for Animal Health said today. The outbreak killed 32 of the 36 pigs on the farm. A report from the country’s ag ministry says the outbreak was outside of the country’s control zone for the disease and may be linked to contact with wild animals. The National Pork Producers Council announced this morning it is cancelling the World Pork Expo this June in Des Moines, Iowa, as a precaution against travelers carrying African swine fever. USDA Secretary Sonny Perdue said Tuesday he hoped “we’ll be able to double and triple those numbers,” referring to U.S. ag exports prior to the trade war with China. Structural issues between the two countries are yet to be settled, he said.  Also, today in a CNBC interview Treasury Secretary Steven Mnuchin said the U.S. and China are making good progress on reaching a trade agreement.

Cattle: Cattle futures ended lower and in the bottom end of the daily ranges. June cattle fell 40 cents to $119.95 and October dropped 50 cents to $118.075. Feeder cattle closed 40 cents to 97.5 cents lower. Futures drifted lower on speculation this week’s storm will not dramatically constrict slaughter or beef movement. Packers are buying cattle steady to slightly lower in the south, with little cash trade reported in the north. Packers continue to use captive supplies and forward purchases to limit the impact of the harsh winter weather on cattle gains and marketings this year, ahead of rising supplies in May and June. This week’s slaughter is estimated at 360,000 head, up from 356,000 head last week. The markets did find light support from wholesale beef prices rising at midday, with Choice up 44 cents and Select up 52 cents. There has been plenty of warning about today’s U.S. winter storm, reducing the impact on the industry outside of truck shipments. Still, the area of greatest concern for livestock will be from eastern Wyoming and northeastern Colorado through northwestern Kansas and much of western, central and northern Nebraska to South Dakota and much of Minnesota. U.S. 2019 beef production is forecast at a record 27.343 billion lbs. this year but that is down 630 million lbs. from the November estimates prior to this year’s harsh winter weather. Third-quarter production is expected to be the most since 2008, while fourth-quarter production is forecast to be a record. Price forecasts were unchanged with a second-quarter average of $124 and the third quarter at $115.  

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