After the Bell: Corn, Beans Extend 6 1/2-Years Highs, Wheat Ends Lower

Posted on Wed, 01/06/2021 - 14:27

Corn: March corn futures prices closed up 3 1/4 cents at $4.95 today and hit another contract and 6.5-year high. The corn market bulls are keeping their foot on the gas amid tightening global supplies and concerns about crop development in South American corn regions despite some recent rains. Speculative interest on the long side of the corn futures market remains high, as key outside markets are suggesting the “inflation trade” is heating up raw commodity prices. Traders are focused on USDA’s supply and demand updates next Tuesday. Most look for USDA to lower its estimates for U.S., Argentine and Brazilian corn production. The size of those cuts will set the tone for trading into the establishment of crop insurance prices in February.  

Soybeans: Soybeans posted gains of 10 to 15 1/4 cents but finished in the lower end of today’s trading range. Soymeal futures ended mid-range with gains of $4.80 to $7.90 through the July contract. Soyoil closed low-range with gains of 24 to 30 points and well below early highs. Futures again sprinted to strong gains early in the session only to retreat into the close. Fundamental support for the buying in the soy complex today came from South American supply concerns, especially in Argentina. While soy crushers have returned to work, unionized grain inspectors remain on strike and Argentine farmers are planning a three-day protest Jan. 11-13. Dry weather is also reducing Argentine crop estimates. While weather in Argentina is worrisome, conditions across much of Brazil are favorable.  

Wheat: An early rally in wheat futures fizzled after the market failed to move to push above yesterday’s six-year highs. SRW wheat futures settled ½ to 6 ½ cents lower, while HRW wheat posted losses of 4 ¼ to 5 ¾ cents. Nearby contracts led losses. HRS wheat futures finished around a penny lower. Wheat futures remain in a followers’ role, and strong early gains in the corn and soybean markets bolstered wheat as well. But those markets settled well off their highs and wheat was unable to push to new highs, triggering a round of profit-taking. Unlike corn and beans, wheat lacks a compelling demand story, which has been a limiting factor for the market. While upcoming restrictions/taxes on wheat exports out of Russia and reduced crop prospects in Argentina could shift some business to the U.S., that has yet to occur is a sizable fashion, despite the price slide for the U.S. dollar index. Global wheat supplies are still plentiful.  

Cotton: March cotton fell 29 points to 80.06 cents and December cotton was up 10 points to close at 76.21 cents. Nearby futures rose to the highest since December 2018 on the weekly chart before running out of gas and falling back in the red and setting new session lows in the final 30 minutes of trading. Trade will be dominated by the weekly export sales data in the morning. Accumulated export shipments are already running 34% ahead of last year but unshipped sales are 19% behind a year ago. It will be important to see continued strong shipments and new sales. The trade remains optimistic China and others will continue to scoop up cotton in anticipation of a strong global economic recovery later this year. Chinese cash yarn prices ended the year on their highs.  

Hogs: February lean hog futures closed down $1.15 at $69.775. April futures lost $1.10 at $73.00 and closed nearer the session low today after scoring a 2.5-month high early on. Some profit taking in the futures markets was featured today after recent gains. Prices were also pressured today as the lead February hog futures contract still holds a more-than-$7.00 premium to the CME Lean Hog Cash Index, which is presently projected at $62.42, according to Dow Jones Newswires. Two weeks of sharply reduced holiday production have cleared the pipeline. Today’s hog slaughter came in a 495,000 versus 472,000 last week and 495,000 at this time a year ago.  This week’s product market action has signaled stronger underlying demand among retailers on price breaks, despite the post-holiday season typically being a fairly lackluster demand period.  

Cattle: February cattle fell a nickel to $115.00; April futures rose 7.5 cents to $119.275 and June gained 27.5 cents to $114.95. March feeders were down 85 cents to $135.575. After early weakness, live cattle futures rebounded to close slightly higher but below key overhead resistance. The market is finding support from general economic optimism and speculation more fiscal stimulus is coming in January.  U.S. stock indices rose to new records and crude oil is holding above $50 a barrel. The ability to extend strength after yesterday’s sharp turnaround is positive. Optimism for Q2 and Q3 is rising after light placements in October and November. Rising corn prices will help to trim heavy cattle weights. Cash cattle trade in the south remains undefined.  But beef cutouts are $3.50 lower, suggesting plenty of packer margin to pay more.