After the Bell: Corn, Beans Retreat on Profit Taking Ahead of the Weekend; Wheat Rallies

Posted on Fri, 10/16/2020 - 14:24

Corn:  December corn slipped 1 ¾ cents on Friday to $4.02, paring its weekly gain to 7 cents.  December 2021 futures fell a penny to close at $3.95 ¾ this week. December futures popped up to $4.09 overnight, the highest for the nearby futures since August 2019 and closed lower. Chart watchers will watch for a close above this year’s high in December futures at $4.04 ¾ for a new buy signal. First support is $3.85 and backed by $3.77. Pre-weekend hedging pressured futures late. Harvest in the Midwest is marching forward without pause with relatively open weather for most of the Midwest for the next 7 days. The U.S. crop size is pretty much set, but Chinese demand is not. This will produce a wide swinging trade with December trading between $3.70-4.15. The arrival of Brazil’s wet season is imminent; Argentina will also get some widespread rains next week.

Soybeans: November soybeans closed Friday down 10 3/4 cents at $10.50 on profit-taking from recent solid gains that saw prices hit a contract high last week. For the week, November beans lost 15 1/2 cents. December soybean meal futures fell $4.60 at $367.50 and for the week gained $3.80. It was a week of normal and arguably healthy consolidation and profit taking in the soybean and soybean meal futures markets this week, amid price uptrends that are still firmly in place. Such action suggests the path of least resistance for soybean and meal futures prices next week will remain sideways to higher. Solid demand for U.S. soybeans also leans favorably for further gains in soybean and meal futures. At present, any rain that falls will be welcome in Brazil and Argentina the next week. Rains fell in the heart of Brazil earlier this week. If the normal wet season kicks into gear, that will be a big plus for a good start to this year’s crops after dry weather delayed planting the past three weeks.

Wheat: For the week, December SRW futures rallied 31 1/2 cents with the front-month contract hitting the highest level on the weekly continuation chart since December 2014. December HRW futures firmed 23 1/4 cents this week, while December HRS wheat gained 16 cents.  Bulls carry strong momentum into next week, though the decline from session highs today suggests the market will need fresh bullish news to build upward momentum. Dryness concerns in the U.S. Plains and other key production areas must stay in focus for funds to keep building their net long position. But the wheat market is also likely to need support from corn and soybeans. If those markets pull back, wheat is likely to follow. Export demand for U.S. wheat isn’t bad, but it’s not strong enough to support a sustained rally. The lack of price competitiveness for U.S. wheat will cap rallies if global dryness concerns ease.

Cotton: Prices opened lower Friday and quickly rallied to the highest since February. December futures gained 70 points to 69.92 on Friday, extending the weekly advance to 228 points. Prices opened lower on profit taking but quickly rebounded after reports Beijing ordered Chinese cotton mills to stop buying Australia supplies, according to Reuters citing two China-based cotton traders. Relations between the two nations have been deteriorating since Australia accused Beijing of meddling in domestic affairs. China banned coal shipments from Australia last week. Good news was reported this morning on the macro-economic front. Retail sales increased 1.9% in September according to the Commerce Department. Consumers spent strongly on vehicles, clothing and sporting goods. However, Europe continues to expand Covid-19 shutdowns and the U.S. is clearly not in any position to declare victory just yet.

Hogs: December lean hog futures slipped $0.075 at $69.80 today after hitting an 11-month high earlier today. For the week, December hogs gained $2.685. Not a bad day Friday for the hog market bulls as they pushed prices to a new for-the-move high and then saw a minor pullback. Look for some follow-through technical buying early next week. Cash market fundamentals are also favoring the hog bulls. The national average hog price moved up 65 cents on Thursday and Iowa/Minnesota gained $1.51. The pork cutout value declined $2.92 on Friday after Thursday hitting the highest level since late May at over $100. USDA estimated this week’s slaughter at 2.688 million head, down 42,000 head from last week and 35,000 head less than last year, suggesting USDA underestimated the amount of herd reduction during the pandemic earlier this year.

Cattle: Live and feeder cattle futures faced followthrough selling today, with charts reflecting technical damage. Live cattle were able to settle well off session lows but the market still posted losses of 62 ½ cent to $1.10 for the day, with the December contract finishing nearly $4 lower for the week. Feeder cattle futures dropped 82 ½ cents to $2.775 today, with most contracts posting $2-plus losses. November feeders only posted an 80-cent loss for the week. Next week, USDA will deliver its monthly Cold Storage Report, followed by its monthly Cattle on Feed update. Attention on both reports is elevated as consumption has shifted due to the coronavirus pandemic, and of course the spring processing disruptions disrupted the normal flow of cattle through the supply chain.