After the Bell: Corn Rallies Sharply After USDA Slashes Production Forecast; Soy, Wheat Follow Higher

Posted on 06/11/2019 3:19 PM

Corn: Corn futures faced pressure overnight and in the early hours of the day trading session, but the market turned sharply higher in response to USDA’s report data. Futures settled 9 ¼ to 12 ½ cents higher, with the December contract leading gains. USDA unexpectedly slashed 10 bu. from its national average yield projection and lowered planted and harvested acreage by 3 million, dropping its crop estimate by 1.35 billion bu. to a four-year low of 13.680 billion bushels. Traders had expected NASS to be more cautious with its cuts. This resulted in 2019-20 ending stocks for the U.S. coming in at 1.675 billion bu., much tighter than the 1.917 billion bu. traders anticipated and 810 million bu. lighter than it forecast last month. This shifted traders back to the reality that the U.S. and global supply situation has changed dramatically for 2019-20.  

Soybeans: July soybeans closed up ¾ cent at $8.59 ¼, with November rising 1 ¼ cents to $8.87. Meal was up about $1 and soybean oil fell 16 points. Soybeans tried to follow corn prices higher but lacked much fundamental support from today’s USDA supply and demand updates that still confirm record U.S. and global inventories through the 2019-20 season. Despite a record slow start to plantings and major USDA adjustments to the corn balance sheet, USDA analysts decided to make no changes to soybean planted acres or yield. They did increase the total supply projection 75 million bu. from last month due to bigger beginning stocks. USDA made no changes to the demand side of the new-crop soybean balance sheet. The increase to total supplies and no changes to usage raised its new-crop ending stocks projection by 75 million bu. from last month. USDA now estimates the new-crop on-farm cash soybean price at $8.25, up 15 cents from May. Soybean oil inventories for 2019-20 were raised 85 million lbs. to 1.535 billion but still down sharply from the 1.950 billion forecasts for 2018-19.  

Wheat: SRW wheat futures gained 7 1/2 to 10 3/4 cents today, while HRW contracts were up 2 1/2 to 5 cents. Prices closed near their daily highs. Spring wheat futures closed up ¼ to 1 cent. The wheat market rallied today in part due to strong gains in corn futures. Today’s monthly USDA supply and demand report was a mixed bag for the wheat market. The SRW wheat crop peg was about 3 million bu. below the average pre-report trade estimate and down about 7 million bu. from last month. The white winter wheat crop estimate was down about 2 million bu. from last month and pre-report trade expectations. However, USDA’s all-wheat production estimate was up 6 million bu. from last month and 20 million bu. above the average pre-report trade guess. The bigger-than-expected winter wheat crop estimate is driven by the hard red winter wheat crop estimate that came in 29 million bu. above the average pre-report trade estimate. That’s also up 14 million bu. from last month. On U.S. wheat carryout, 1.102 billion bu. was pegged for 2018-19; down from 1.127 billion bu. in May; and at 1.072 billion bu. for 2019-20; down from 1.141 billion bu. in May.   

Cotton: July futures were down 32 points and December futures closed down 41 points today, and at new contract low closes. Today’s monthly USDA supply and demand report was given a slightly negative read today. There were no changes to U.S. cotton data other than a slight dip in the 2019/20 price forecast (down 1 cent to 64 cents).  Global carryout was raised for both 2018/19 and 2019/20, the latter up to 77.26 million bales from 75.69. That gave the report a slightly bearish look. President Trump said today China desperately needs a trade deal with the U.S. and that he thinks China’s President Xi will meet face-to-face with him later this month. However, the recent harsh rhetoric coming from the U.S. on the China front has many skeptical such a meeting will occur. Cotton traders are generally giving the present status of the trade talks a bearish read for any agreement coming soon.

Hogs:  Hogs were mostly sharply lower today. August futures fell $1.875 to close at $82.975, with December falling $2.95 to $76.425. Funds keep piling into the short side of the market, despite signs of improving fundamentals. It is a similar selling pattern to what happened in corn during April, before prices rallied. U.S. Meat Export Federation President and CEO Dan Halstrom says the “lifting of Mexico’s retaliatory duties was the most welcome news the U.S. pork industry has received in a long time.” However, the market failed to hold Monday’s rally on news the U.S. was suspending new Mexico tariffs. That may be because President Donald Trump threatened to impose further tariffs of 25% or more on $300 billion in Chinese goods if President Xi Jinping doesn’t sit down with him at the Group of 20 summit in Japan this month. The retaliatory duties from China continue to put U.S. pork at a significant disadvantage in China. Midday pork cutout values rose $1.46 on moderately active sales. Ham prices rose to the highest in nearly three years yesterday.  

Cattle: Live cattle futures posted gains of 52 1/2 cents to $1.025 through the December contract. Feeder cattle futures finished 57 1/2 cents to $1.70 lower through the November contract.Feeder cattle futures were pressured by the surge in corn prices following USDA’s Supply & Demand Report. Corn prices rallied after USDA slashed its new-crop corn ending stocks projection by 810 million bu. from last month and raised its 2019-20 cash corn price by 50 cents. Live cattle futures finished high-range for a second straight day and extended their rebound from the late-May lows. To attract strong buyer interest, however, the cash market must show that it has stabilized and is ready to rally. Cash cattle trade averaged $113.76 last week, down nearly $2 from the previous week.  

Add new comment