After the Bell: Grains, Soybean Retreat Ahead of USDA Reports as Weather Leans Negative

Posted on 09/11/2019 2:46 PM

Corn:  Corn rose to six-session high and closed lower, but off the day’s lows. December corn fell 1 ½ cents to $3.60 a bushel. The market tried to build on Tuesday’s rally but ran into weather-inspired selling ahead of the USDA ‘s first field-based crop production report on Thursday. Warm temperatures and rain are seen aiding kernel fill. However, the rain is some areas will be unnecessary as soil conditions are already too wet. There remains a hint on the long-term forecasts maps that colder temperatures may development after Sept. 23 but that’s too far in the future to lift prices ahead of the key USDA data tomorrow. Early harvest results are generally good in southern areas not it by spring flooding but more mixed in the Midwest. The EIA reported ethanol production at 1.023 million barrels per day, up 10,000 from last week, with stocks at 22.5 million barrels, down 1.3 million. There were 262 corn deliveries against the expiring September futures today, with Bunge stopping 31, Dreyfus stopping 35, JP Morgan stopping 97, and ADM house stopping 43 lots. Sounds like the commercials don’t want to be short nearby cash. There were another 80 corn delivery receipts canceled, for 1,628 outstanding. Cash is still firm in the interior as we grind down tightening 2018 supplies and are several weeks away from full harvest.  

Soybeans:  Soybean futures settled with losses of 4 1/2 to 5 1/2 cents through the July 2020 contract, which was midrange. Meal futures dropped $3-plus, while soyoil ended 30 to 35 points higher. Soybean futures gave back some of Tuesday’s gains today as China said it would not include U.S. soybeans in the 16 products that would have tariffs removed starting Sept. 17. Tuesday’s rally was driven largely by talk China planned to sweeten trade deal negotiations by offering to more aggressively buy U.S. ag products.Price action tomorrow will be driven by USDA’s September Crop Production Report. Traders expect USDA to lower its soybean crop estimate by around 100 million bu. from last month and for 2019-20 ending stocks to be lowered nearly that much. Based on the strong finish to 2018-19 demand, it wouldn’t surprise us if new-crop ending stocks come in even lower than anticipated, especially if the cut in crop size matches up with pre-report trade expectations.

Wheat: Wheat futures finished 1 to 4 3/4 cents lower in SRW contracts, 4 to 5 1/4 cents lower in HRW contracts and 1 1/2 to 2 1/4 cents lower in HRS contracts. Wheat futures pulled back some from gains the first two days this week. The lack of followthrough fund short-covering signals the upside is limited barring a bullish surprise in Thursday’s Supply & Demand Report or a surge in the corn market. USDA will not provide an updated wheat production estimate tomorrow. That will come via the Small Grains Summary at the end of the month. Traders aren’t expecting much change in projected 2019-20 ending stocks this month, meaning the report should be a yawner for the wheat market. Much of tomorrow’s post-report price direction is likely to come on spillover from corn and soybeans. Global production figures will be watched more closely than the domestic balance sheet tomorrow. While Australia cut its wheat crop estimate earlier this week, higher production estimates in other countries seem to be offsetting the declines.

Cotton:  December cotton futures closed up 3 points at 59.37 cents today, in quieter trading ahead of a big data day on Thursday. Traders are awaiting Thursday morning’s weekly USDA export sales report and the monthly supply and demand report. The monthly USDA report is expected to show cotton production of around 22 million bales, exports of 16.78 million bales and carryover of 7.2 million bales in the 2019-20 marketing year, according to a Bloomberg survey. There are early harvest reports coming out of Texas cotton country that the crop is not yielding as high as expected. China is seeking to ease the impact of the trade war by exempting certain U.S. goods from the 25% tariffs put in place last year. The exemptions could be a Chinese gesture of good will toward the U.S. ahead of negotiations in October but is probably more a means of supporting its economy. An exemption list of just 16 items will not speed the two sides toward a new deal. Tuesday the South China Morning Post reported China was expected to buy more agricultural products in hopes of a better trade deal with the United States.

Hogs:  Futures ended lower to sharply lower, giving back some of the hard-won gains on Tuesday. October hogs fell $2.55 to close at $60.175 and December fell 57.5 cents to $61.20. Prices opened lower and tested support on another day of weakness in the cash hog market. Slaughter the first three days of this week was estimated at 1.457 million head, up from 1.340 million a year ago. The big runs should be peaking soon but will remain elevated and at record levels throughout the fall and winter. However, midday pork cutout values came in stronger, gaining 72 cents, mostly on a rebound in picnics and ribs. But hams and bellies were slightly higher and remain the key to making a bottom in the fresh pork trade. Movement was moderately active after strong sales on Tuesday. Thursday’s weekly export sales will set the tone for trading tomorrow. The market’s weakness today came in response to pork being left off the Chinese list of tariffs waivers announced overnight. Prices came off the lows in part because of the strength in cattle.

Cattle: December live cattle futures closed up $2.40 at $103.625, while November feeder cattle gained $2.85 at $133.55.  Heavy short covering and bargain hunting were featured today after futures prices hit contract lows on Monday. Further price gains this week would begin to suggest the cattle futures markets have bottomed. The futures markets are also supported this week on notions packers will begin to share the record profits with producers. Also, beef demand has been stronger than expected with U.S. unemployment at a 50-year low. Any improvement in export demand could see a quick rally with speculative funds sitting on one of the smallest net long positions in more than 10 years. The noon beef carcass report showed Choice grade down $3.43 and Select off $1.78. Choice cutouts remain at a $22.75 premium to Select, signaling marketings remain very current, a positive factor for a turnaround in cash prices. Initial light cash cattle activity in Texas was reported around $96, which would be down notably from sales in the state last week. The sales were light and isolated.

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