AFter the Bell: Cool Temperatures Ease Crop Stress Pressure Corn, Soy Prices

Posted on 07/30/2019 3:49 PM

Corn: Nearby corn futures prices closed around 5 to 6 cents lower today, near their daily lows and hit nine-week lows.  A small improvement in U.S. corn crop conditions helped to pressure futures today. The bulls were expecting last week’s warm and dry weather to have produced greater crop stress. USDA on Monday rated 58% of the U.S. corn crop in “good” to “excellent” condition, a one-point uptick from a week ago but 14 percentage points under last year. As of July 28, just 58% of the crop is silking, which compares with 83% for the five-year average and 90% last year. Most key producing states lag normal development by 20 percentage points or more.Also, Corn Belt weather forecasts are not ideal, but not threatening, either. Cool weather at present and in the coming days won’t help add growing degree units. Rainfall will be limited through the period, though some thunderstorms will dot the central and northern Plains over the next week and some heavy clusters affect the western Corn Belt later this week. There was also some pressure on the corn market today from comments from President Donald Trump that were very negative on any China/U.S. trade deal being reached anytime soon. Trump said China can’t be trusted.

Soybeans: Nearby soybean futures dropped around 7 cents today and hit six-week lows. Prices did finish nearer their daily highs, which gives the bulls a bit of hope today’s losses have the bears at least temporarily exhausted.  While today’s futures action is not overall constructive, there may be enough dry spots in the Corn Belt and enough questions on U.S. production to hold today’s lows heading into the Aug. 12 USDA Crop Production Report. Importantly, the narrative is turning because this crop is not as bad as some had feared just a few weeks ago. USDA on Monday afternoon rated 54% of the U.S. soybean crop in the “good” to “excellent” categories, with one percentage point shifting from “good” to “excellent.” This was in line with market expectations. But the amount of crop falling in the “poor” to “very poor” category also ticked up a point to 13%. But crop development continues to lag.  Also negative for the grain markets today, President Trump tweeted this morning there is no sign China is buying U.S. agricultural products. Trump suggested that if China waits to see if he is re-elected, the trade deal will be much tougher on Beijing than the deal we are negotiating now  

Wheat:  Wheat futures end lower and in the bottom half today’s range. September SRW wheat fell 6 ¼ cents to $4.97 ¼ and September HRW futures fell 3 cents to $.33 ½. September spring wheat was down 3 ¾ cents at $5.28 ¾. The wheat market ended slightly weaker as it followed the corn and soybean markets lower. The drop in spring wheat crop ratings came as a surprise on Monday, but the data provided only limited support. Drier conditions in Canada also helped the market hold support today. There are some reports about disease pressure developing in the spring wheat crop, but the global supply of high-protein wheat remains larger than a year ago. World wheat prices have not moved in either direction in recent weeks which limits rallies and cushions the breaks in the U.S. markets

Cotton: Futures closed lower but off the day’s worst levels. December cotton closed 85 points lower at 63.36 cents. Cotton opened lower after another week of improvement in the U.S. crop and negative comments by President Trump on the outlook for U.S./China trade talks.The amount of cotton rated in the top two categories edged a percentage point higher versus last week to 61%, but that masked a five-point increase in the amount of cotton rated “excellent.” Last year at this time, just 43% of the crop received a “good” to “excellent” rating. The development of the crop is also giving the market little reason to fret. USDA reports 86% of the crop is squaring and 45% is setting bolls, just one and three points behind the norm, respectively. Thirty-four percent of the Texas crop is setting bolls, which is in in line with the five-year average. Traders are looking for USDA to raise its production closer to 23 million bales from 22 million estimated earlier this month when it releases its next production report on Aug. 12.  

Hogs: August lean hog futures closed down $2.125 today, while the October contract lost $2.45. Both contracts hit two-week lows. Strong followthrough selling surfaced today after Monday’s sharply lower to limit-down trading action in the futures. Much of the selling was technically related. The volatile cash hog market is also adding to selling pressure in the futures. The CME Lean Hog Index is projected to be at $82.10 when it comes out Wednesday. Adding to selling interest in the hog futures today were very negative comments President Donald Trump made regarding the U.S./China trade negotiations. He said this morning that China can’t be trusted and could be dragging its feet on a trade deal until after the 2020 presidential elections.

Cattle:  Live cattle closed lower but well above session lows and feeders ended higher. October live cattle fell 37.5 cents at $109.075 and November feeders were up 1.125 at $143.525. Fed cattle fell this morning on worries packers may try to buy cattle lower this week. But firmer wholesale beef at midday, with both choice and select gaining more than a dollar, should support cash bids. USDA released the most recent data and the percentage of prime dropped below the prior year for the first time since 2017. The choice and prime percentages have dropped well below the last two years. While weekly beef sales slowed last week, they remained well above the five-year average, a further sign of strong domestic demand and higher prices for prime and choice grading cattle into year end. In 2019, fed kills have been big not only because there were more cattle to kill but to meet rising demand. The cutout has averaged higher in 2019 than 2018 on larger slaughter and with production slightly above last year.  

 

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