After the Bell: Grains, Soy Cotton Rise on Smaller USDA Acreage Estimates

Posted on Tue, 06/30/2020 - 15:20

Corn:  July corn rose 12 1/2 cents to $3.38 1/2 and December futures jumped 15 3/4 cents to close at $3.50 1/2. Prices hit nearly three-month highs and closed at technically bullish monthly high closes on this last day of the month. The USDA estimated corn plantings would decline about 5 million acres below what farmers told the government they intended to plant in March. USDA estimated 92 million acres of corn were planted this year--3.2 million less than traders expected on average and below the lowest trade forecast. The decline suggests farmers took prevent plant insurance wherever they could in response to the combination of falling prices, worries about the impact the Covid-19 pandemic on corn use in feed and fuel, and uncertainty about Chinese commitments to buy U.S. ag goods. It may take increase weather risks to the yield potential in July to sustain the rally.  

Soybeans: Soybean futures finished 17 1/4 to 20 3/4 cents higher today. November futures led the price gains. Meal futures rallied $5.20 to $7.30. Soyoil futures posted gains of 35 to 36 points in most contracts. USDA’s Acreage Report showed soybean plantings around 900,000 acres less than traders anticipated, while June 1 stocks were 6 million bu. less than expected. While those figures were slightly supportive, the bulk of today’s price rally came on spillover from the surge in the corn market. That suggests that corn likely needs to extend today’s rally or the soybean market could face profit-taking on Wednesday. Traders aren’t likely to get too concerned with weather and the soybean crop until August.

Wheat: Winter wheat futures strengthened in the wake of USDA’s reports. Winter wheat contracts ultimately settled in the upper half of their daily trading range but well off session highs with gains of 2 ¼ to 6 ¾ cents. HRS wheat futures posted even stronger gains and ended 8 ¼ to 12 ¼ cents higher. USDA made a big, 7.2 million-acre cut to its principal crop acres estimate from March intentions, with much of that cut coming out of corn. The surprise lifted all boats, wheat included. Spring wheat led gains in the wheat complex as USDA’s other spring wheat acreage estimate of 12.2 million acres was down 390,000 acres from March intentions and a much bigger cut than analysts anticipated.  

Cotton: July cotton futures closed up 136 points at 60.98 cents today, with December futures gaining 125 points at 60.88 cents. Prices closed near the daily highs. The cotton market saw good buying interest today in the wake of a bullish USDA cotton acreage report. USDA estimated U.S. cotton plantings at 12.185 million acres, down 1.518 million acres from March intentions and roughly 1 million acres less than traders expected. Monday’s USDA crop progress report showed 41% of the U.S. cotton crop in good to excellent condition compared to 40% in the previous reporting week. Twenty-four percent of the cotton crop was rated by USDA as poor to very poor versus 25% last week.

Hogs: August lean hog futures closed up 57 ½ cents at $49.025 today on tepid short-covering after hitting a contract low on Monday. Lean hog futures are trying to shake off last week’s USDA Hogs & Pigs report that was bearish. The all hog inventory rose to the highest ever. Demand for pork is key but keeping hog slaughter plants operating and increasing production is needed the next two months to reduce the backlogged supply of hogs. Hog backlogs are estimated to top 1 million (possibly 2 million), signaling it will take several more weeks/months to work through the backlog. The pork cutout value fell another $1.54 at midday Tuesday, led by a drop in bellies.  

Cattle:  Live cattle and feeders closed lower, erasing earlier gains. August fell 20 cents to $96.275 and October were down 32.5 cents to $99.725. August feeders fell 65 cents to $132.85. After trading higher early, cattle futures followed the weak expiration of the June futures, which fell $3.35 to $91.65. There has been packer demand for deliveries against the June, but that failed to lend support into the expiration. The seasonal trend lower into July and production will be large. Better domestic and export demand will be required to sustain any rallies next month.  Part of today’s choppy trade reflected the end-of-month positioning.  With cash expected to trade lower this week, there will likely be little fresh buying interest to start July. Midday beef prices were mixed with Choice cutouts 23 cents lower at $208.13 and Select trading 76 cents higher at $201.47