After the Bell: Soybeans Fall on China Trade Concern; Wheat Ends Mixed

Posted on 02/11/2019 3:15 PM

Corn: Nearby futures prices hit multi-week lows today but finished near mid-range and with fractional losses. Prices are now near strong chart support at the bottom of their choppy trading ranges. Prices initially rallied on Friday after USDA cut U.S. yields and production more than expected and Dec. 1 inventories were also below expectations. However, the market’s focus has quickly shifted to USDA’s large reduction to corn feed and residual usage forecast that left carryover supplies little changed from December’s forecast. USDA on Friday also said global ending stocks would be 980,000 MT larger than forecast in December because of a bigger crop forecast for Argentina. Corn inspected for export in the week ended Feb. 7 fell to 743,536 MT, down from 901,214 a week earlier but within trade expectations. Brazil corn regions will get near- to above-normal rainfall over the next two weeks as cool fronts trigger scattered thunderstorms, easing the size and intensity of soil moisture dryness.  Argentina saw some storms through today, but that is followed by at least 10 days of drying, which may become more notable with time because rainfall was also limited over the last two weeks. Brazil's CONAB comes out with its safrina corn crop estimate Tuesday, which will be closely watched by traders.

Soybeans: Futures failed to hold overnight gains and closed lower and near session lows. March soybeans fell 9 ½ cents to settle at $9.05. March meal dropped $1.20 to $304.90 with March holding plunging 63 points to 30.24 cents. Futures tumbled to start the week after a disappointing reaction to neutral USDA supply and demand forecasts last Friday. Ongoing concern about U.S./China trade talks this week making enough progress to stave off heightened trade tensions and largely favorable South American weather forecasts add to the lack of buying interest today. China struck an upbeat note on overnight as low-level trade talks resumed with the United States, but also expressed anger at a U.S. Navy mission through the disputed South China Sea, casting a shadow over the prospect for improved Beijing/Washington ties. The United States is expected to keep pressing China on longstanding demands that it reforms how it treats American companies' intellectual property in order to seal a trade deal that could prevent tariffs from rising on Chinese imports. Soybean inspected for export were 1.064 MMT, down from 1.092 MMT a week ago and 1.340 MMT a year ago. China took 487,450 MT of soybeans inspected for export last week, or 46% of the total. Demand is ok but is still trying to catch up on lost Chinese business the past five months.  

 Wheat: Futures erased part or all of the early-session losses to end mixed to higher. March SRW futures rose 1 cent to $5.18 ¼, HRW March futures fell ½ cent to end at $4.93 ¾ and March spring wheat futures jumped 5 1/4 cents to $5.73 ¾. The mixed settlement reflects the divergent data released last Friday by USDA.  U.S. winter wheat acres were estimated at the second-lowest ever and 838,000 smaller than expected by traders ahead of the report. The smaller acres were a signal for spring wheat prices to begin to build a planting incentive, despite the troubles selling U.S. wheat on the world market. USDA raised its world wheat production forecast 1.3 million metric tons (MMT), led by an increase of 1.3 MMT for Russia.  Russia’s ag ministry will set up a new grain exporters’ union after meeting with traders on Monday. No new export restrictions were announced. Russia also is considering sending 50,000 MT to North Korea for aid. Russia and Kazakhstan are set to sign a deal Tuesday to supply wheat and other grains to Iran annually, a Kazakhstan deputy minister said Monday. U.S. wheat inspected for export last week rose to 562,307 MT, up from 442,775 MT a week earlier and a slightly supportive development.

 Cotton : Futures prices dropped sharply today, with the nearby contracts down 191 to 200 points. March cotton hit a 14-month low today.  Bearish outside market forces helped to sink the cotton market today, as the U.S. stock market and crude oil prices were weaker, while the U.S. dollar index was stronger. The National Cotton Council said Saturday that U.S. cotton producers intend to plant 14.5 million acres this spring--up 2.9% from 2018. The NCC said upland cotton planting intentions are 14.2 million acres, up 2.8% from 2018, while extra-long staple (ELS) intentions of 264,000 acres would be a 6.3% increase. Using about a 10% abandonment rate and an average yield of 840 lbs. per acre would generate a cotton crop of 22.7 million bales -- 21.9 million bales of upland and 782,000 bales of ELS.

HogsLean hog futures finished 12 1/2 cents to $1.45 higher through the October contract, with summer-month contracts leading the price gains. Corrective buying fueled the price strength in the hog market today amid ideas too much premium has been removed from the market. Buyer interest in February hogs was limited despite the discount the lead-month contract holds to the cash index with just three days until expiration. That suggests traders sense more near-term pressure on the cash market. The national direct cash hog price was not published this morning due to light trade. With a wave of winter storms headed for the Midwest, hog transportation is likely to be limited much of this week. That could temporarily support the cash market, but such situations are rarely supportive for long as marketings tend to back up.

Cattle: Live cattle and feeders both rallied and closed making new session highs. April live cattle rose 37.5 cents to close at $1.283 with March feeders closing up 57.5 cents at $1.44675. Midday beef prices strengthened, with Choice up $1.14 and Select jumping $2.05. However, sales were very slow after business last week proved to be sluggish. Rib and loin cuts continue to lead, helping to push the carcass values above the five-year average Sales were light even as slaughter rose 4.2% last week to 614,000 head. Packers did pay more for cattle on Friday and that signals packers may need cattle this week. Packer margins are strong for February despite slipping $2.85 last week to $53.30 per head. USDA on Friday trimmed is estimated gain in 2019 beef export to 75 million lbs., down 10 million lbs. from its December forecast. USDA’s export projection may prove too low as cattle ranchers in Australia’s Queensland state lost more than 500,000 head in recent flooding.

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