After the Bell: Beans Rally on Trade, Smaller Crop; Corn Continues to Drop

Posted on 08/13/2019 3:45 PM

Corn: December corn futures closed down 16 1/4 cents at $3.76 1/2 today and hit a three-month low. So far this week corn has dropped 41 1/4 cents. Corn prices have nearly completed a round trip to the pre-planting lows. December fell into and filled the upside gap left on May 14, falling to a session low at $3.76. The corn market got no traction from signs of slight easing in the U.S.-China trade war after the two sides talked overnight and the U.S. will delay some tariffs on Chinese products past the Sept. 1 imposition.  Corn Belt weather forecasts lean slightly wetter in parts of the Midwest with fluctuating temperatures expected the next 10 days. This also favors the bearish camp. The weekly USDA Crop Progress Report on Monday afternoon showed conditions that matched the week-prior result but slightly exceeded industry expectations for a 1% drop in the “good” to “excellent” categories. This also added price-pressure to the market.

Soybeans: Soybeans rose more than 1% and soymeal gained 2% on Tuesday. November soybeans rose 9 ¾ cents to $8.89, while December soybean meal futures gained $5.90 to $304.60. December oil fell 51 points to 29.54 cents on unwinding of prior spreads versus the meal. The market was supported by Monday’s USDA first soybean crop estimate falling 120 million bu. below what traders anticipated and 165 million bu. below the July projection. USDA projects new-crop world soybean inventories will fall to 82.37 MMT from a record 94.33 MMT this season. Funds came into yesterday’s report long corn and short beans and prices have moved exactly opposite, encouraging some unwinding of those spreads. Prices extended overnight gains on signs of easing U.S./China trade tensions. Top U.S. and Chinese negotiators spoke via phone overnight. The Trump administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month, the Office of the U.S. Trade Representative said on Tuesday.  With the Argentine peso spiraling down, it becomes a question of whether that encourages producer selling of grain and soybean stocks or hoarding as has been seen in the past. Argentine producers may opt to hold supplies as a hedge against inflation, creating possible new markets for U.S. soy products.

Wheat: SRW wheat futures finished narrowly mixed with a downside bias and midrange. HRW futures settled around 8 cents lower and HRS futures around 4 cents lower – both ending near session lows. SRW wheat futures were torn between weakness in the corn market and strength in soybeans. In the end, weakness in the other wheat markets led to a mostly lower finish. The HRW and spring wheat markets were still reacting to Monday’s USDA reports that showed bigger crops than traders anticipated. Given the bearish report data and a lack of supportive news, wheat futures are likely to struggle to find buyers until the corn market puts in a bottom.Funds have liquidated all of their net long stance in SRW futures this week and have added to their net short positions in the other two markets. Funds are adding to their record short position spring wheat futures. The fund selling is likely to continue until they have incentive to shift gears. Given the bigger-than-expected crop estimates, that incentive likely needs to come from the demand side of the market.  

Cotton: Cotton futures took back yesterday’s losses and then some, with futures settling high-range and up 69 to 131 points. Nearby contracts led gains. The cotton market got a lift today from some positive developments on the U.S./China trade front. High level officials from the U.S. and China spoke over the phone and the U.S. says it will push back 10% tariffs on certain Chinese goods from Sept. 1 to Dec. 15. Trump again took to Twitter to say that China has pledged to make big purchases of U.S. farm goods, though he also acknowledged the country has failed to followthrough on such pledges in the past. More talks are expected over the next two weeks. Otherwise, news on the supply front has favored market bears. USDA’s cotton production estimate came in higher than expected yesterday, as did its global carryover forecast for 2019-20. And USDA raised the amount of cotton rated in “good” to “excellent” condition as of Sunday by two percentage points to 56%. That’s 16 points ahead of year-ago.  

Hogs: Futures ended sharply lower in the most-active October futures today. October fell $2.50 to $64.575, with December down 75 cents to $63.025. Prices gave back earlier gains by the close, following limit-down cattle futures. Weaker fresh pork prices at noon and lower cash bids added to the negative tone after prices traded higher on hopes for easing U.S./China trade tensions. Top U.S. and Chinese negotiators spoke via phone overnight and agreed to talk again on the phone within two weeks. The Trump administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month, the Office of the U.S. Trade Representative said on Tuesday. China's WH Group, owner of Smithfield Foods, reported a 16.9% fall in first-half profit as higher meat prices due to the outbreak of African swine fever hurt. "We anticipate the greatest challenge in China is the continuously soaring hog prices as a result of growing supply shortages, which will push down our packaged meats margin," the company said in a statement.   

Cattle: The front-month live cattle futures closed locked down their daily limit losses of $4.50 and set contract lows today. The daily expanded trading limit will be $4.50 again on Wednesday. Meantime, November feeder cattle futures closed down $5.60 and notched a contract low. Feeder cattle futures will also see expanded daily trading limits on Wednesday, at $6.75. The cattle futures markets this week have been blindsided by concerns about slaughter capacity after a fire at a Tyson Foods beef processing plant near Holcomb, Kansas last Friday. The plant is one of the largest in the U.S. and will be shuttered for an indefinite time period.  The Tyson fire is boosting wholesale beef prices sharply higher, and they jumped another $5.45 for Choice at midday Tuesday and were up $2.43 for Select, on solid movement of 96 loads. Packer margins jumped to $184.90, up from $132.90 a week ago, according to    

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