After the Bell: Grain, Soy Rally Pauses Amid Harvest Hedging, Technical Selling

Posted on Mon, 09/21/2020 - 14:28

Corn: Futures ended near session lows, nearly erasing all of last week’s gain. December corn was down 8 3/4 cents at $3.69 3/4 and March was down 8 1/4 cents to $3.79 1/4. Corn was lower all session, extending overnight losses after the reopening on harvest hedging and macro selling as the stock market was sharply lower and took commodities down, too. Oil and gasoline prices fell more than 4%, gold fell more than 3% and the dollar was sharply higher.  The markets are getting nervous about the November U.S. elections, rising U.S.-China tensions and uncertainty about a second wave of Covid-19 infections. Fund buying in corn jumped 25,000, to more than 58,500 futures and options, most of which was short covering rather than new long positions, according to weekly CFTC data released on Friday. Funds were estimated buying more than 40,000 contracts the final three days of last week, and likely were cutting those positions today.

Soybeans: November soybeans closed the session down 21 cents at $10.22 1/2 and near the daily low. December soybean meal dropped $4.00 today to close at $338.10. December bean oil fell 94 points to close at 34.20 cents. Technical selling and weak long liquidation in the bean, meal and oil futures markets were featured today amid general financial and commodity markets weakness, despite new U.S. soybean sales announcements this morning. USDA announced a 132,000 MT daily soybean sale to China for 2020-21 delivery this morning. USDA also announced 132,000 MT sold to Pakistan and 171,000 MT sold to unknown destination for 2020-21 delivery.  Daily sales last week totaled 1.794 MMT. Weekly U.S. soybean export inspections of 1.311 MMT were in line with expectations but last week’s inspections saw a big upside revision reported today. A much stronger U.S. dollar index that hit a six-week high today also worked against the soybean market bulls.

Wheat: December SRW wheat futures closed the day down 20 1/4 cents at $5.54 3/4, after hitting a seven-month high overnight. December HRW wheat futures lost 17 cents to close at $4.87 1/4, after scoring a five-month high overnight. Wheat futures today gave back a significant portion of the big late-week gains last week amid today’s general risk-off attitudes across the stock, financial and commodity markets. A strong rally in the U.S. dollar index today also helped to weigh on the wheat markets. Solid losses in soybean and corn futures markets added the general fund selling pressure in wheat, as wheat has been a follower of corn and soybeans recently. Money managers reduced their net long in SRW wheat futures and options through Sept. 15 to 15,112 contracts from 23,175 a week earlier. However, traders estimated the Wednesday through Friday fund buying at 30,000 futures contracts, which would boost the wheat long to the most bullish for the date since 2012.  

Cotton: Cotton futures finished 24 to 42 points lower through the July contract, which was in the lower end of today’s range and just below opening levels. Cotton futures got caught up in the selling that pressured many of the commodity markets and stocks today. Strong gains in the U.S. dollar added to the price pressure. But given the outside market pressure and risk aversion, cotton didn’t perform too poorly. Still, the outside markets likely need to stabilize for buyers to return to the cotton market. Traders will keep a close watch on Tropical Storm Beta, which is located just off the Texas coast. Beta is expected to make landfall north of Port O’Connor, Texas, Tuesday morning and then drift northeast, with remnants expected through the lower Delta.  

Hogs: Futures ended mixed to mostly lower Monday. December hogs fell $1.975 to $61.55 and February was down $1.325 to $67.225. Cash hogs were steady to higher at midday with solid negotiated numbers. There’s been some optimism that demand for U.S. pork will continue to see a boost on both the global market and domestically. National daily direct barrows and gilts at the National Daily Direct were 13 cents lower but the Iowa/Minnesota was up $1.05. Pork values were sharply higher at midday, rising $3.09 to $90.62. Hams jumped more than $14 to start the day. Bellies were also sharply higher. Midday sales were moderately active at nearly 161 loads. Futures were pressured by the general weakness in financial and commodity markets amid growing risk-off mentality after recent gains.  

Cattle: Live cattle futures settled midrange with moderate losses ranging from 65 cents to $1.25 today. Nearby feeder cattle futures settled 17 ½ cents lower to 20 cents higher on the pullback in corn prices, but deferred months also posted moderate losses for the day. Feedlots bought quite a few cattle last week, limiting their needs this week and curbing cash market expectations. Trade took place at an average price of $103.54 last week, and initial cash opinions this week are for steady action… unless the product market really takes off. Boxed beef values strengthened for the first time in quite a while on Friday, with Choice and Select beef grades building on those gains this morning. But the $1-plus gains this morning slowed movement dramatically, raising questions about whether the market has yet uncovered value levels.