After the Bell: Grains Rally to Session Highs Late on Technical Buying, Weather Concerns

Posted on 09/16/2019 2:33 PM

Corn: Corn futures started this week in positive territory, set back, but then moved back toward the highs of the day by the close. Futures settled 4 to 5 ¼ cents higher.  Today’s price action was encouraging as the corn market was able to reverse early losses and posted a new high for the move. More rain is expected for the Midwest later this week and freezing temperatures remain out of the forecast, limiting crop concerns for the time being. Dryness is, however, a concern in South America, though some rains are working their way into the forecast for southern Brazil. Export inspections were light the week ending Sept. 12 at 421,803, continuing the trend of disappointing corn exports. The demand story continues to limit the market’s upside, though some good news could be coming for the ethanol sector. The White House is expected to announce plans to reallocate waived blending requirements soon, in addition to funding to enable more blending of biofuels. That paired with soaring crude oil prices could lend corn some support.  Funds still have a large net-short position that could provide fodder for a strong rally if a catalyst arises.  

Soybeans:  November soybean futures closed up 1 1/4 cents at $9.00. December soybean meal lost $2.90 at $298.90 and December bean oil gained 85 points to 30.28 cents and hit a more-than-five-month high. The soybean futures market saw light support from USDA this morning confirming the sales 256,000 metric tons (MT) of U.S. soybeans for delivery to China during the 2019-20 marketing year. That follows 204,000 MT sold to China last Friday. Also, the NOPA soybean crush, released this morning, was above trade expectations in August and at the seventh-highest level on record. NOPA members crushed 168.085 million bushels of soybeans last month. That was about steady with July’s crush but well above the August 2018 crush of 158.885 million bushels, which was the previous record for the month. Weekly U.S. soybeans inspected for export fell to 666,490 MT from 977,914 MT a week earlier and below 787,246 a year ago, USDA said this morning. Soybeans inspected for export to China slowed last week to about 275,000 MT. Trade talk focuses on reports China has allocated a duty-free tariff rate quota for 5 MMT U.S. beans for the fourth quarter. The trade thinks the country purchased from 1.0 to 2.0 MMT last week, with most off the Pacific Northwest. Midwest weather still leans negative as no threat of frost or freezes in the coming week will keep crops developing favorably  

Wheat:  Winter wheat futures closed higher, near session highs and above the opens. December SRW rose 5 ¼ cents to $4.88 ¾ while December HRW futures rose 9 ¼ cents to $4.09. December spring wheat rose 2 ¼ cents to $5.07 ¾.  Wheat prices built on last week’s strong rally on further short covering and some new technical buying as prices rebounded from early losses. European wheat prices rose to the highest in almost a month today to add to the positive signs of global wheat prices setting seasonal lows.  Dry conditions across parts of the Southern Hemisphere look to continue to add some stress to developing wheat crops, while too much rain remains a problem for U.S. spring wheat harvesting. Traders were waiting for the weekly crop progress updates later today. Analysts surveyed by Reuters on average expected the USDA to show the U.S. spring wheat harvest as 82% complete, up from 71% a week ago. The USDA also planned to add its first planting progress figure for the U.S. winter wheat crop, which will be harvested in 2020. Analysts on average saw planting progress as 8%complete, with estimates ranging from 4% to 15%. A few dry pockets in the western areas of the Great Plains remain a potential problem if rains don’t materialize the next three weeks.  

Cotton:  Cotton futures closed higher and above their opening range. December cotton rose 31 points to 62.59, above the open at 62.57 cents. Cotton prices rose in tandem with the strong rally in crude oil prices Monday, following the bombing of Saudi oil facilities during the weekend. A further increase in tensions in the Middle East could propel oil prices sharply higher than current levels, injecting further inflationary support into the cotton market and raising the costs for synthetic fibers.  Hot, dry weather is increasing the stress on cotton from the Delta to Texas. Continued stressful weather may curb U.S. production, which has already been hit by adversity in some areas of the Southwest. The market was also supported by short covering in response to stronger prices last week and signs of improving U.S./China trade relations. More talks are scheduled for later this week in Washington with high-level discussions still set for October.  

Hogs:  October lean hogs dropped $2.85 to $63.625 today, while December gained $1.97 to $70.675. December futures hit a six-week high today. Nearby lean hog futures were pressured today by a big kill to start the week—estimated at 487,000 head. Last week's slaughter, at around 2.6 million head, was 12% above year-ago.  Nearby futures are also struggling with weakness in the cash markets. The noon pork report showed carcass cutout value up 90 cents, with 138.19 loads moved. December hogs were boosted by hopes for new Chinese U.S. pork business. China's pig herd fell by 38.7% in August versus a year ago, according to data published by China's Ministry of Agriculture and Rural Affairs last week. Pork prices soared to a record 40.5 yuan ($5.74) per kilogram by Sept. 4, according to agriculture ministry data, a 78% jump compared with the same time a year ago. China was the top buyer of U.S. pork in the week ended Sept. 5, USDA reported last Thursday, and more sales are expected after China eased tariffs. It will take time to balance out the optimism regarding possible Chinese purchases and efforts to resolve the trade war, against large domestic supplies coming to market.

Cattle: Live and feeder cattle futures got off to a choppy start to the week. Live cattle ultimately settled low-range and down 7 ½ to 65 cents. Feeder cattle finished a nickel higher in the front-month and 17 ½ to 97 ½ cents lower in deferred contracts. After tearing higher over the past week, traders paused to book some profits today, with gains in the U.S. dollar index and sharply higher oil prices providing incentives to that end. Last week’s kill was the smallest since the Tyson fire mid-August. Last week, cash cattle action took place at near-steady prices of $100.07, according to USDA. And we would not be surprised to see firmer action this week. Choice boxed beef values climbed 28 cents and Select dropped $2.65 this morning, widening the spread between the two to $25.21. That continues to suggest marketings are current. There is also growing confidence lawmakers will clear the U.S.-Mexico-Canada Agreement, which should help to label the playing field for U.S. beef.  

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