After the Bell: Soybeans Lead Grains Higher on Weather Uncertainty, China Demand Hopes

Posted on Mon, 12/21/2020 - 14:49


Price action: March corn futures prices closed the day up 2 1/2 cents at $4.40 and near the session high and hitting a contract high. After an overnight setback in corn on news the coronavirus mutated, causing European travel restrictions and new lockdowns that pressured global equity and energy markets, U.S. stocks pared losses, helping corn futures to rebound and move to a new for-the-move high. Cash corn basis levels improved at ethanol plants today. While, USDA did not announce any daily corn sales this morning, the market is supported by China’s tightening feed grains situation supporting speculation more U.S. sales to China are coming. U.S. corn inspected for export fell to 762,900 MT last week, down from and below trade estimates calling for 750,000 to 1.1 MMT. However, China was the destination for about 272,000 MT last week. Meanwhile, China announced a plan to resume state corn sales last week.  

Soybeans: March beans closed at $12.47 1/2, up 23 1/2 cents. March meal gained $6.80 to close at $412.30. Soybeans and meal futures set new contract highs today. March bean oil closed at 39.55 cents, down 12 points on the day, after that market hit a contract high last Friday. Soybean futures saw some overnight price pressure as global stock and financial markets shuddered on reports that a new strain of Covid-19 is spreading in the U.K. However, it appears the initial worries on that matter were overblown as stock and financial markets settled down during the U.S. trading session. The soybean futures market remains supported by the record U.S. crush pace, sustained U.S. export shipments and better sales. There has been some talk that China may be shifting some February purchases from Brazil to U.S. origins as Brazilian crushers are eager to outbid exporters for early-harvest supplies.

Wheat: March SRW closed 3 cents higher at $6.11 1/4 and March HRW gained 5 1/4 cents to $5.74 1/2. March spring wheat rose 1 3/4 cents to $5.70 1/4.  Wheat was down hard overnight on the selloff in global equity and commodity markets on news of the mutation of the coronavirus but came slowly back along with the corn and soybeans on fresh fund buying. Funds flipped to a net long of 6,672 SRW wheat futures and options contracts as of Dec. 15 from their net short of 5,692 a week earlier. However, trade estimates had pegged the buying at 28,000 futures contracts. Prices were also buoyed by firmer Black Sea prices with Russian prices leading the gains. Traders continue to debate the immediate and longer-term impacts of Russia’s new export taxes and export quotas on world trade flows.  

Cotton: Cotton closed sharply lower and near session lows with March futures down 2.40 cents to 74.76 cents per lb. The rally reversed Monday on worries about demand amid relatively high U.S. and world supplies. Cotton followed global equity markets lower this morning but could not recover with the intra-day rebound in stock markets. Market bulls were hit by fears the possible outbreak of a new strain of COVID-19 in the UK.  Britain invoked strict new safety measures, including shutting off air travel with Europe. Look for underlying support to develop on breaks as the market anticipates USDA will further trim its current 16 million-bale U.S. crop to 15.0 to 15.6 million on Jan. 12 in the final production estimate. Chinese demand has been stronger than expected the past six weeks and sales to Pakistan have been good.

Hogs: February lean hog futures closed steady at $65.925 today and nearer the session high. The lean hog futures market paused today ahead of a very big report week. Some early price pressure in hog futures was seen due to worries about a new strain of Covid-19 that is spreading in the U.K. and may be headed to the U.S. However, the initial worries appear to have been a bit overdone as stock and financial markets settled down as the trading day progressed.  On Tuesday, USDA will release its monthly Cold Storage Report . On Wednesday, USDA will release its Quarterly Hogs and Pigs Report, which is expected to show a downward revision to past data and will signal whether producers backed off fall farrowings as much as previously indicated

Cattle: February live cattle fell 20 cents to $114.65 and April was up 5 cents to $118.70. March feeders were up 82.5 cents to $143.125. Cattle futures closed higher last week but started on the defensive this morning on uncertainty how a mutation in the coronavirus will impact demand and slaughter schedules. But the market was able to pare losses and close mixed. While USDA’s Cattle on Feed report offered no surprises, it did indicate plenty of market-ready animals into the first quarter. However, placements for October and November were down 457,000 head and are constructive fundamentally for the market by late in the first quarter. The cash cattle market found some support last week after opening lower to start but turning steady to firm to finish the week. Most look for bids to be $1 to $2 higher this week. The small negotiated trade volume the last two weeks suggest packers will be more eager to accumulate inventory to meet sales commitments into the new year.