After the Bell: Grains, Soy Rally Amid Supply Concerns, Waiting for Thursday's Weekly Export Sales Report

Posted on 06/12/2019 3:08 PM

Corn:  Corn futures erased earlier losses and closed slightly higher Wednesday. July corn was up 2 ¼ cents at $4.30 and December futures were up 1 ½ cents at $4.48 ½. The market was supported by the aggressive USDA move to cut this year’s crop to the smallest in four years. The agency cut the national yield 10 bu. per acre from a month ago and lowered estimated planted acres 3 million, which could swell when final estimates are released later this year. Smaller export projections for the 2018-19 season raised the carryover forecast by 100 million bushels. But new-crop ending stocks are forecast to fall 810 million bu. to 1.675 billion bu., the smallest in six years. The weekly EIA report showed ethanol output rose 52,000 barrels per day (BPD) to 1.1 million BPD while inventories fell 751,000 barrels to 21.8 million barrels. Strong production and lower inventories are a positive surprise.

Soybeans: Soybean futures prices closed up around 19 cents and near their daily highs today. Meal futures were up just over $5.00 today, while July bean oil was up 38 points. The soybean market rallied today on notions USDA will revise down its U.S. soybean production forecast next month. The agency’s chief economist, Robert Johansson, told Reuters on Tuesday revisions are likely. That hints at higher planted acreage but possibly lower national yields from late planting. USDA did not make any changes to its 2019 soybean production estimates Tuesday, with yield holding at 49.5 bu. per acre and a crop at 4.15 billion bushels. USDA lowered old crop soybean exports by 75 million bu. due to recent trade issues though, which was enough to raise old crop ending stocks to a record 1.070 billion bu. The USDA also increased its new crop soybean carryout estimate 75 million bu. to 1.045 billion bushels. Traders are awaiting Thursday morning's USDA weekly export sales report, which is expected to show soybean sales of 200,000-500,000 MT in the 2018-19 marketing year and for 100,000-300,000 MT in sales in the 2019-20 marketing year.

Wheat: Winter wheat futures saw choppy to lower trade overnight, but these markets strengthened during the day trading session. SRW wheat settled 8 ¼ to 10 ½ cents higher and HRW was up roughly 5 cents. Spring wheat futures faced pressure for most of the day and ended 2 ½ to 5 cents lower. Strong gains in the bean market provided spillover support to the winter wheat markets today. In addition, the Australian Bureau of Agricultural and Resource Economics and Sciences slashed 2.7 MMT from its March estimate to 21.2 MMT, well under the 10-year average crop size of 24.7 MMT, as the country is struggling with a third straight year of drought. Dryness is also a concern on the Canadian Prairies and southwest Russia.  

Cotton: Cotton futures finished in the upper end of today’s range but off session highs with gains of 67 to 95 points through the May 2020 contract. Cotton futures were supported by corrective buying today as the market bounced after key support held earlier this week. But buyer interest was somewhat limited by strength in the U.S. dollar index. Focus tomorrow will be on USDA’s weekly export sales data. The reporting period ended June 6, one day before the sharp price drop that tested the May lows, so weekly sales may not be as strong as some are anticipating. Weekly sales in excess of 250,000 bales and exports above 400,000 bales are likely needed to spark a bullish response.  

Hogs: July lean hog futures closed up 42 1/2 cents and the August contract was up 5 cents. Prices closed near mid-range, with August futures hitting a three-month low today. The hog market bulls have no traction as China-U.S. trade tensions are rising rapidly. President Donald Trump on Tuesday took credit for holding up a trade deal, and Monday he threatened massive tariffs on Chinese goods if China President Xi Jinping doesn’t meet with him at the G-20 talks in late June. With less than three weeks before the proposed meeting between the Chinese and U.S. leaders, expectations for progress toward ending the trade war are low since there has been little preparation for a meeting. The national average cash price rose 60 cents on Tuesday. Pork carcass cutout values fell another 87 cents at midday, with sales of 179.78 loads. Slaughter is up 83,000 head so far this week from a year ago. With supplies plentiful, the market remains worried about domestic demand.   

Cattle: Cattle and feeder futures closed lower but off the day’s worst levels. August cattle fell $1.625 to $105.20 and August feeders were down 32.5 cents at $137.80. The market continues to struggle to build on rallies, on worries about demand. Midday beef prices were steady to weak with Choice cutout up a penny while Select fell 82 cents. Sales were moderately active on some fill-in buying for Father’s Day features. Worries that steak and beef demand may be peaking for the summer weighed on buying interest in the cattle futures. The weaker fresh pork market also signaled more competition for beef at the meat case this year. Traders will be closely watching the weekly USDA export sales report on Thursday for clues to global demand for beef from the U.S. after a slow start to business this year. President Donald Trump said on Tuesday that he was holding up a trade deal with China and had no interest in moving ahead unless Beijing agrees again to four or five "major points" that Trump did not specify. China has been increasing the number of non-U.S. suppliers approved for exporting beef.  

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