After the Bell: Grains, Soy Continue to Consolidate Ahead of July Weather Forecasts

Posted on 06/22/2018 3:36 PM

Corn:  Futures end narrowly mixed and below today’s openings. July ends down 4 ¼ cents this week but up more than 18 cents from the lows on Tuesday.  After falling for the fourth consecutive week into the first full weekend of summer, the market is due for a bounce. The June 19 low looks like a candidate for an exhaustion bottom as volume on the CME on Tuesday in all agricultural futures and options was a record.  July corn futures fell to a new contract low and close nearly 18 cents off the session lows. Weather is wet then turning drier and hot next week. Length of the heat and whether it cuts off storms moving through the Midwest after July 4 will be the focus of daily forecasts. Updated USDA acreage forecasts and the June 1 inventory forecast on July 29 will conclude the trading week on Friday. All eyes will be on daily weather forecasts through the July pollination period. Right now the market prices reflect nearly weather-proof and record yield potential.  It will take time for market attention to turn away from the trade headlines and refocus attention on declining global supplies.

Soybeans: Futures contracts ended the day up around 13 to 17 cents and at the highs for daily ranges. For the week, July soybeans lost 7 3/4 cents and November futures were down 10 3/4 cents. From a price perspective, the key next week will be if soybeans can continue to recover from Tuesday’s spike down to multi-year lows. There are near-term technical clues soybeans put in a market bottom this week, but price action next week will go a long way in determining if such is indeed the case. Fundamentally, some late-week efforts on the part of the Trump administration to engage in talks with China aimed at averting the July 6 tariffs deadline is being viewed as modestly positive by traders. Fresh news on the U.S.-China trade front next week would help to drive price direction. The other major market driver next week will be Corn Belt weather forecasts, which presently favor the bearish camp. However, extended outlooks into late next week call for hotter conditions.

Wheat: SRW prices finished down 4 cents in the July and off 1 ½ cents in the December. HRW contracts ended the day down 4 1/2 cents in July and down 3 ¾ cents in December. Spring wheat futures were down 3 to 3 ¾ cents today. Most contracts closed low-range today. For the week, December SRW lost 14 3/4 cents and December HRW was down 31 cents. Rains this week in the Texas and Oklahoma Panhandle vicinity are raising concerns about quality and yield loss as harvest is underway. More heavy rain is possible for the Central Plains Sunday and Monday.  Welcome rains are expected for eastern Ukraine and western areas of Russia’s southern region today and Saturday. Rains are also possible in Australia for southeastern Queensland and northern New South Wales early next week, though much more will be needed after months of dryness. Recent rains are improving crop prospects across the Northern Plains spring wheat regions. Weather conditions in the U.S. Plains and other world wheat regions come Monday morning will impact wheat futures prices.

Cotton: July cotton futures enjoyed some renewed buying today and futures settled high-range and up 85 to 222 points through the July 2019 contract, with the front-month leading gains. But the market still posted sharp losses for the week, with the July contract plunging 529 points and the December contract falling 455 points. The combination of revitalized trade fears and some rains along the Gulf Coast weighed heavily on the cotton market this week. Traders will watch to see if the rains were enough to improve or at least halt deterioration of the U.S. cotton crop in USDA’s update Monday condition update. Another big focal point next week will be USDA’s Acreage and Grains Stocks reports Friday. Our plantings survey signals farmers likely boosted acreage slightly from March intentions to around 13.7 million acres. This roughly lines up with what traders surveyed by Bloomberg expect the report to show.  

Hogs: Lean hog futures end lower and near weekly lows. July through December futures declined 5 cents to 65 cents today. The market is pressured by the ongoing concern that exports to China and Mexico may slow the remainder of the year in the current trade environment. Funds have little incentive to buy or stay with long positions. Cash hogs were on the defensive all week with no Saturday kills planned. Packers will start cash bidding weaker next week as live supplies remain adequate and may be starting a seasonal increase. Heat late next week may disrupt movement and prevent packers from getting too bearish. Pork prices were up overall this week, reducing packer losses to about $1 per head from $9 a week ago.  

Cattle: August live cattle closed down 22 1/2 cents at $105.90 and about midrange. Prices were still up this week after reaching a three-month high at $107.625. Feeder cattle futures closed up 40 cents to 72 1/2 cents in the August to November contracts. August feeders closed higher for a third straight week. Kansas cattle traded down at $109 to $110 today, compared with $110 to $113 last week, which may keep the market on the defensive. Discount futures trade to cash should help to keep marketings current into July. Slaughter this week was estimated at 664,000 head, up 10,000 from a week ago and 25,000 higher than a year earlier. Packers are in control and unwilling to share nearly $220 margin per animal with producers. The rising slaughter and enough company-owned supplies will pressure the cash market for another week

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