After the Bell: Soy Gain on China Buying Talk; Livestock Fall on Slow Recovery Concerns

Posted on Mon, 05/11/2020 - 14:38

Corn: Corn closed lower, erasing overnight gains. July corn fell 3/4 cent to $3.18 1/2 with December down a penny at $3.34 3/4. Prices rose overnight on sub-freezing temperatures in the Midwest during the weekend and an early rally in oil prices. However, since the cold was not a big surprise the price impact was limited as warmer temperatures and rains are set to follow into late this month.  Oil did turn lower by morning on worries about a second wave of Covid-19 as lockdowns are withdrawn. Tomorrow at 11 a.m., USDA releases its first 2020-21 supply and demand projects. Traders are looking for old-crop corn inventories to rise to 2.224 billion bu. from 2.092 billion bu. forecast a month ago as USDA trims demand. New-crop carryover is expected to jump to 3.389 billion bu., with a huge range of trader estimates stretching from 2.665 billion to 4.295 billion bushels.  On average, analysts under-estimate corn ending stocks the past 20 years, but the range of trade estimates should catch USDA’s projection.

Soybeans: July soybeans closed up 4 1/2 cents at $8.55 today—near mid-range after hitting a three-week high. July meal finished down $0.50 at $290.30 and July bean oil lost 5 points at 26.49 cents. The soybean market today only got modest support from reports of more demand coming from China. Reports today said Chinese importers bought at least four cargoes, or about 240,000 metric tons (MT), of U.S. soybeans on Monday for shipment beginning in July. One report said more sales are possible as a Chinese state-owned firm had sought offers for up to 20 cargoes shipped from July to November. Traders are looking for U.S. soybean planting in this afternoon’s weekly USDA Crop Progress Report to show around 40% of the crop is planted as of Sunday, compared with 23% in the ground as of a week ago Sunday. Last year, only 9% was planted because of widespread flooding.  

Wheat: July soft red winter wheat futures closed down 4 3/4 cents at $5.17 1/4. July hard red winter wheat futures lost 5 cents to close at $4.75. Both markets closed near daily lows. Spring wheat rose about 3 cents. Winter wheat futures prices dipped on notions any permanent yield damage to this year’s U.S. crop from recent cold weather will only be modest, with winter wheat too immature to be seriously injured. Spring wheat planting has slowed further with the cold weather. Losses in the corn and soybean markets today also spilled over into some pressure on wheat futures.Traders will be looking for this afternoon’s USDA Crop Progress Report to show wheat ratings have slipped only about 1% from the 55% rated in “good” to “excellent” condition a week ago. Spring wheat planting may top 50% completed, up from 29% last week but below the 70% on average for the week.  

Cotton: Cotton futures saw two-sided action today, opening under pressure but generally settling in the upper half of their daily trading ranges. July through December cotton futures settled 1 to 36 points higher, while far deferred months posted similar losses. The cotton sector is expecting a bearish report from USDA tomorrow, with a surge in planted acres and a drop in usage expected to push 2020-21 cotton carryover to 7.74 million bales, according to the average estimate of analysts surveyed by Bloomberg. But the range of expectations is very wide, stretching from 5.50 million to 9.75 million bales. Given expectations, it’s unclear whether the data is already factored into prices. If there is any sort of friendly response, remember that any rallies are selling opportunities given the bearish balance sheet.  There is also uncertainty about whether USDA will stick with its lower export forecast from April or if the agency will push its export tally back up based on solid exports to date.  

Hogs: Lean hog futures settled 97 1/2 cents to $1.425 lower through the August contract. October and December contracts posted slight losses, while February hogs finished slightly higher. Nearby hog futures continued last week’s pullback. Traders narrowed the premium May hogs hold to the cash index and widened the discount in summer-month contracts. May hogs finished 57 1/2 cents above where the cash index will be quoted tomorrow (as of May 8) with just three trading days left. Summer-month contracts are $5.275 to $6.50 below the cash market, signaling traders have contra-seasonal cash weakness built into the market. Estimated hog slaughter jumped to 357,000 head, which is 87,000 head more than last Monday, though 101,000 head below year-ago.  

Cattle: Cattle and feeder cattle closed sharply lower to limit down, erasing earlier gains. June live cattle fell $19725 to $92.675 with October down the $3 limit to $101.275. Live cattle limits expand to $4.50 on Tuesday. May feeders fell $3.95 to $123.65. Prices fell on worries it will be a slow recovery in slaughter rates. Today’s slaughter rose to 86,000 head, up from 75,000 head a week ago but still 33,000 head behind last year. Some 800,000 head of cattle have not been slaughtered during the pandemic that would have been otherwise. While the worst may have past, it will be months to dig out from the lost production and backed-up marketings. Beef was mixed at midday with choice up another $6.93 to $467.82 after surging about $83 last week. Select cutout slipped 12 cents lower today.