After the Bell: Risk off Ahead of Holiday Weekend Amid Rising U.S./Chinese Tensions

Posted on Fri, 05/22/2020 - 14:29

Corn: A quiet, mixed finish on Friday. July corn gained 1/4 cent to $3.18 and down 1 1/4 cents for the week. December lost 1/4 cent to close at $3.32 ¾ and up 3/4 cent for the week.  Mixed price action for the week but near weekly lows and just above key support.  The market was pressured this week by favorable central U.S. weather forecasts into the summer, deteriorating Chinese relations and uncertainty how quickly feed and fuel producer demand will improve after recent shocks. Much of today’s trading looked like traders evening up positions ahead of the long holiday weekend and where U.S./China trade relations will be next Tuesday. Fears that the strained relationship will result in a breakdown in the phase-one trade deal continue to increase. The market will be highly dependent on increased Chinese buying of corn, ethanol and DDGs.  

Soybeans: July soybean futures closed the day Friday down 1 3/4 cents at $8.33 1/4, and for the week lost 5 1/4 cents. July soybean meal gained $1.60 Friday, paring this week’s decline to $3.40. Prices Thursday hit a contract low. July soybean oil futures closed down 47 points Friday at 26.64 and closed at a technically bearish weekly low close. Prices did gain 6 points on the week. The soybean bulls faded late this week to suggest some follow-through selling pressure on Tuesday, after the three-day holiday weekend. The soybean meal futures market saw some tepid short covering Friday, but the meal bulls will have to shift into a higher gear for the soybean market to sustain any kind of a price uptrend. Deteriorating U.S.-China relations are also scaring the soybean market bulls. A further negative twist occurred on Friday as China unveiled details about its plan to impose a national security law in Hong Kong that could see mainland intelligence agencies set up bases in the global financial hub.  

Wheat: July soft red winter wheat futures closed down 7 1/4 cents on Friday, at $5.08 3/4, and for the week did gain 8 1/2 cents. July hard red winter wheat futures on Friday fell 10 cents to $4.44 1/2 and for the week fell 7 3/4 cents. Spring wheat futures gained 6 ¾ cents. Prices were pressured Friday on better rain forecasts for next week in southern Europe and parts of the Black Sea region. U.S. futures prices next week will likely continue to follow Paris and Black Sea futures. Rains are also forecast for the U.S. Plains in the coming days, which will aid yields but may hurt protein levels. There is talk that millers are beginning to shop for higher protein supplies. Escalating China-U.S. tensions could also put a damper on the wheat market next week.

Cotton: Cotton futures finished 45 to 89 points lower through the March 2021 contract today. For the week, July cotton futures dropped 64 points and the December contract slipped 36 points. Cotton futures hinted that the corrective rebound from the early April lows could be stalling and the market is ready to roll over. But the uptrend remains intact. Key next week will be whether bulls can defend uptrending support. Violation of the uptrend would point to an extended pullback. But if the uptrend remains intact, bull could make another move to the upside.  More focus will shift to U.S. planted acreage over the next month as traders prepare for USDA’s Acreage Report at the end of June.  

Hogs: Hogs ended lower Friday and for the week. July hogs fell 1.275 to $55.90 and down $1.85 for the week. October futures fell $1.075 to $50.025 and down $1.375 for the week. Cash hogs were mixed this week with little negotiated trade on Friday. The availability of market-ready barrows and gilts remains more than ample.  This is at a time when the supply chain remains under pressure.  While processing numbers have been on the rise, it’s a very delicate balance for packers to increase their daily slaughter totals when shackle space and available labor are limited.  This week’s kill rose to an estimated 2.130 million head, up 32,000 head from last week and down 180,00 head from a week ago. Pork values were steady at midday as the cutout slipped 3 cents to $97.82. That’s still down more than $12 this week and will likely keep pressure on futures and cash markets next week.  The story the next month will be all about Chinese buying of U.S. pork and how quickly restaurants and food service companies can resume operations.  

Cattle: Mixed finishes Friday with June cattle down $1.10 to $97.70 and up 70 cents for the week. August cattle slipped 47.5 cents this week to close to $97.325 and October fell 95 cents to $99.40.  Cattle futures paused this week after prices touched an eight-week high and daily slaughter rose to a six-week high. Direct cash cattle trade was at a standstill.  Asking prices for cattle left on showlists are around $120 to $125 after most traded $115 to $120 this week. Most look for lower bidding from packers next week that may keep pressure on the futures despite the deep discount to cash prices. Boxed beef was lower at midday on light demand for moderate offerings.  Choice cutouts were 94 cents lower at $400.87 and Select was $6.47 lower at $376.06.  The focus of how to trade futures continues to be on how long the packing industry will support cash cattle prices as wholesale beef prices retrace their historic price rise.