After the Bell: Quiet Consolidation Ahead of Weekly Export Sales Data

Posted on Wed, 12/18/2019 - 14:49

Corn:  Corn opened lower and closed in the bottom third of today’s range. March corn was down 3 cents to $3.87 and December 2020 dropped 2 cents to $4.00. Futures closed near the late-session lows as buying waned following the sharp four-day rally on news of a tentative China trade deal. The Trump administration confirmed reports earlier today that it will move forward with finalizing a rule on U.S. biofuel blending requirements for 2020 that is in line with a plan the Environmental Protection Agency unveiled in October. The move is likely to draw anger from farmers and ethanol advocates, who say that the plan does not go far enough in adjusting for refinery waivers that reduced demand.  Corn and rins both fell on the news Wednesday. South American weather leans negative with more rains in the next week keeping crop conditions favorable in Brazil and shrinking the dry area in Argentina from a third of the production belt to less than a quarter in the coming week.  

Soybeans: Soybean futures finished steady to fractionally lower through the August 2020 contract. The November 2020 contract ended 1 3/4 cents higher. Meal futures finished 60 cents to $1.40 higher. Soyoil futures dropped 35 to 39 points. Corrective trade was seen in the soy complex today. Soybeans faced some mild profit-taking in 2019-crop contracts, while traders also unwound bull spreads. Unwinding of long soyoil/short meal spreads was the dominant feature in the product markets.  Focus tomorrow could return to a more fundamental focus as weekly export sales data should help guide price action. Traders expect soybean sales for the week ended Dec. 12 to total between 950,000 MT to 1.4 MMT. The bottom end of that range of estimates is low given that daily sales announcements during the period totaled 725,000 MT.

Wheat: Futures opened lower and closed in the lower 25% of today’s trading range. March SRW futures fell 8 cents to $5.48 ¼, with March HRW futures sliding 4 ¾ cents to $4.62 ¼. Spring wheat futures were down ¼ cents to 1 ¼ cents.  Futures were under pressure with the trade deals and agreements factored into prices and now market bulls need to see improvement in exports. U.S. wheat export sales in the week ended Dec. 15 are expected to total 200,000 MT to 600,000 MT, compared with 502,674 MT a week earlier, a Reuters survey showed.  The world market remains well-supplied and U.S. wheat is not competitive into many importing nations. China sold 50,599 MT of 2014 through 2018 wheat at its latest reserve auction, which represented just 1.7% of the total that was offered, the country’s trade center reports. The reserve wheat sold for an average price of 2,321 yuan ($331.74) per metric ton. U.S. wheat is offered at $258 to $298 for delivery into Asia. Yellow rust will likely curb China’s wheat production in 2020.  

Cotton:  March cotton futures closed up 30 points at 66.74 cents. Prices closed near the session low. The cotton market has been struggling to extend last week’s gains that came from a bullish monthly USDA supply and demand report, stronger weekly U.S. export sales and the news of a U.S.-China trade deal. Cotton traders want to see more China purchases of the fiber showing up in USDA sales data, before becoming too bulled up. Also, U.S. officials claims of China’s annual purchases of U.S. farm products to jump to between $40 billion and $50 billion over the next two years--as much as double the pre-trade war values—have veteran cotton market watchers skeptical. Beijing has been unwilling to confirm it plans to purchase any specified amount of American agricultural goods.

Hogs:  February lean hog futures closed up $0.05 at $69.90 today, while April futures lost $0.175 at $77.225. Buying interest was limited in hog futures today as the pork cutout value fell another $1.45 Wednesday, on solid declines in bellies and hams. Movement was 171.07 loads at midday. Also, February lean hog futures are at a double-digit premium to the cash hog index. However, that’s also a sign of optimism the cash hog market has bottomed out and will work its way higher in the first quarter. Comments from China’s state planner that it will import more pork and more details from U.S. Trade Representative Lighthizer about the trade accord that could be implemented as soon as February have hog futures traders cautiously optimistic about U.S. pork exports. Focus now is on Thursday morning’s weekly USDA export sales report, and any big purchases that might come from China.

Cattle: Live cattle futures settled narrowly mixed, with nearbys favoring the upside and deferred months the downside. Feeder cattle futures closed 10 to 82 1/2 cents lower in most contracts, with nearbys leading losses. After surging to the upside, cattle futures have set back a bit amid some profit-taking and consolidative trade. That said, the market continues to perform well and momentum favors market bulls. We’re encouraged by bears’ inability to force a test of the 40-day moving average. The downside correction has been driven in large part by a pullback in the boxed beef market. Choice boxed beef fell another $1.63 this morning, with Select down $1.33, and the spread between the values has narrowed to around $9. This will likely limit this week’s cash prospects.