After the Bell: Strong Upside Reversal in Corn lifts Wheat and Soybeans

Posted on Fri, 01/17/2020 - 14:14

Corn: March corn futures made a strong rebound Friday to close up 13 3/4 cents at $3.89 1/4. Prices closed just 1/4 cent off the weekly high. For the week March futures gained 3 1/2 cents. Today’s price action quickly reinvigorated the corn market bulls. After grain traders on Thursday took a dim view of this week’s U.S.-China partial trade agreement and heavily pressured corn futures prices to a five-week low, the bulls stepped right in Friday to buy the big dip in prices. There were rumors in the market today that China has booked 2-4 cargoes of U.S. corn off the Pacific Northwest for spot shipment. The funds also got “wrong-footed” Friday after reportedly selling 40,000 to 60,000 futures contracts Thursday. Look for follow-through buying interest when the markets reopen on Tuesday (Markets are closed for the Martin Luther King holiday Monday.). The key near-term price level is $3.92 in March corn futures. A close above that level would be technically bullish and likely invite more speculative traders to cover shorts and even move to the long side of the market.

Soybeans: Soybeans followed corn higher, paring this week’s declines. March soybeans rose 5 ¾ cents to close Friday at $5.29 ¾, but still down 16 ¼ cents for the week. November soybeans rose 4 ¼ cents to $9.60 ½ on Friday, down 14 ¼ cents for the week. March Meal closed at $300.60, down $2.90 for the week. March soybean oil closed at 33.35 cents, down 100 points for the week. Pessimistic moods shifted to cautiously optimistic about China demand. Prices rebounded on bargain-hunters that could include exporters, speculators holding short positions and domestic crushers and exporters locking in the current prices. Traders continued to mull the implications of this week's U.S.-China trade pact. In the long-anticipated conclusion of a Phase 1 trade deal with Washington on Wednesday, Beijing committed to increase purchases of U.S. farm products by $32 billion over two years. Markets are closed Monday, but China and other world markets are open, which causes the bears worry that China could issue duty free import licenses that would start their annual purchase programs. The bears do not want to be short on the night that China offers such licenses!

Wheat: Wheat futures closed high-range on the day with SRW contracts up mostly around 4 to 5 cents, HRW contracts around 9 cents higher and HRS contracts mostly 8 to 9-plus cents higher. For the week, March SRW futures firmed 6 cents, March HRW futures slipped 1/4 cent and March HRS futures gained 1 3/4 cents. Traders will have to wait an extra day before they can trade the market due to Monday’s Martin Luther King Jr. Day holiday. A lot can change over the extended weekend, but with today’s strong close, bulls have momentum going into next week. A lot of next week’s price action will be based on whether rumored Chinese purchases of U.S. corn (and potentially other commodities) are confirmed via USDA’s daily sales. Failure to confirm Chinese purchases could lead to a pullback in the grain and soy markets.

Cotton: March cotton futures closed up 103 points at 71.25 cents today. For the week March futures lost 6 points. Cotton market traders Thursday debated the clarity of the guarantees that China will spend $80 billion on U.S. farm goods the next two years, taking a dimmer view of the U.S.-China partial trade agreement, and sold off. The biggest negative, which is not new, is China’s insistence to only buy U.S. commodities it needs at prices that are competitive with world suppliers. However, on Friday the cotton market rebounded strongly as the bulls stepped in to buy Thursday’s dip. Rumors in the corn market that China had booked several cargoes of corn likely spilled over into buying interest in cotton futures. Look for some follow-through buying interest in cotton futures next Tuesday, (Markets are closed Monday for the Martin Luther King holiday.) as the near-term technical posture for cotton remains bullish.  

Hogs: Lean hog futures saw a choppy day of trade before settling in the upper half of their daily trading range with gains ranging from 32 ½ cents to 82 ½ cents. The lone exception was the May contract that ended just a few cents lower. Futures were little changed on the week, with the February contract closing 30 cents higher and the April contract down a dime. The market posted a relatively limited response to the signing of the Phase 1 trade deal with China or the passage of the U.S.-Mexico-Canada Agreement this week, but both have positive long-term implications. And strong weekly export sales of pork failed to spur much of a price response. With market-ready hog supplies readily available and packers continuing to process an aggressive amount of pork, it could take some truly eye-popping export numbers to spur a friendly price response. On Wednesday USDA will provide an update on the amount of pork in the nation’s freezers at the end of December, but that reporting period precedes the implementation of trade deals with Japan, China, Mexico and Canada.   

Cattle: Cattle closed higher, paring weekly declines. February live cattle rose 22.5 cents to $126.35 but down $1.07 for the week. April cattle rose 82.5 cents on Friday to $127.25, down 65 cents this week. March feeder cattle futures rose 17.5 cents to $145.00 on Friday but down $2.45 for the week. Cattle tested underlying support for a third week and closed off those lows. Boxed-beef prices rose at midday today, with Choice cutout up $1.09 and Select rising $1.98 on moderately active sales. Cash cattle are fully steady this week and should be higher next week. Domestic beef demand remains outstanding. Traders will be watching for Chinese buying but other overseas customers may step forward to before China buying lifts prices further. Fantastic winter-feeding weather in Texas and Kansas is keeping carcass weights well-above a year ago as we begin 2020. Nebraska weights will start to decline more quickly as winter weather begins to take a toll. Seasonally weights decline until May 1.