After the Bell: USDA Cuts U.S. Corn Crop Forecasts, Leaves Soybeans Unchanged

Posted on 11/08/2019 3:55 PM

Corn: December corn futures closed up 2 cents and near mid-range today after hitting a five-week low early on. Price action today also scored a mildly bullish outside day up on the daily bar chart. For the week, December corn fell 12 cents. USDA trimmed its corn crop estimate 118 million bu. from last month and cut the national average yield estimate by 1.4 bu. Focus next week returns to the remaining U.S. harvest as cold and even snowy weather conditions are forecast early next week. January’s final USDA update may show another reduction after recent cold, snowy weather hurt the more than 6 billion bu. of corn still in the fields at the beginning of this month.Total U.S. corn export commitments are down 47% from a year ago and ethanol production remains sluggish. The rally in the U.S. dollar index this week won’t help the tepid demand pace in the near term.

Soybeans:  January soybeans closed down 5 1/2 cents at $9.31 today and near mid-range. For the week, January beans lost 5 3/4 cents. December soybean meal fell 70 cents to $304.90 today and for the week gained a buck. December soybean oil closed up 7 points today at 31.50 cents and for the week rose 47 points. Look for more choppy and sideways price action for soybean futures in the near term after USDA today failed to deliver any bullish news. The agency left production unchanged from last month and modestly raised 2019-20 carryout when traders were looking for a reduction in U.S. stockpiles. Also, notions as the week wraps are that a U.S./China trade deal may not be as close as was expected earlier this week. President Trump on Friday told reporters he has not agreed to roll back tariffs on China, but that Beijing would like him to do so. Traders will continue to look to export demand for U.S. soybeans to help drive price action. China imported 6.18 million metric tons (MMT) of soybeans in October, down 24.6% from 8.20 MMT in September and 10.7% smaller than a year ago. Nothing is certain on the U.S./China trade front, which has led to choppy price action in soybean futures recently. Look for more of the same in the weeks ahead, unless an agreement between the world’s two biggest economies to roll back existing tariffs can be completed and signed.

Wheat: December SRW wheat futures fell 2 1/4 cents to $5.10 1/4 Friday and for the week lost 5 3/4 cents. December HRW wheat futures dropped 3 1/4 cents today and closed at a bearish weekly low close. For the week, the December HRW contract fell 4 1/2 cents. Spring wheat futures posted fractional losses today. For the week, December HRS futures dropped 12 3/4 cents. With no big surprises in the monthly USDA Supply & Demand Report, focus returns to worldwide demand for U.S. wheat and growing conditions in major producing countries. After resurveying other spring wheat and durum acreage and yields, USDA today cut its all-wheat crop estimate by 42 million bu., to 1.920 billion bushels. The other spring wheat crop estimate was lowered nearly 38 million bushels. Also, wheat futures will likely continue to look to the corn futures market for direction. Corn futures have been trending lower for three weeks—not a good sign for wheat futures.

Cotton: Futures closed higher to add to this week’s small advance. December cotton gained 37 points to close at 64.72 cents, up 49 points for the week after making new weekly highs at 65.06. Cotton rose after USDA’s monthly supply-demand report showed lower U.S. and world production and ending stocks estimates for the 2019/20 crop year.  The agency lowered U.S. production estimates for the 2019/20 crop year to 20.8 million bales vs 21.7 million bales predicted last month, citing a smaller crop in the Southwest. The agency also revised its 2019/20 global cotton production projection. World ending stocks in 2019/20 are now forecast at 80.8 million bales, compared with last month's estimate of 83.7 million bales, while outlook for U.S. ending stocks are now at 6.1 million bales compared with 7 million bales last month, the latest WASDE report showed. The smaller U.S. and world balances will keep traders watching the latest developments on the U.S.-China trade front

Hogs: December lean hog futures ended down 17 1/2 cents at $64.125. the February through July contracts posted gains of 12 1/2 to 37 1/2 cents. For the week, December hogs dropped 32 1/2 cents. Hog futures are likely to stay in pause mode next week as traders wait on more details of a potential U.S./China trade deal. Given the roughly $4 premium December hogs hold to the cash market and record slaughter totals, trade negotiations need to advance or the market is at risk of price pressure. Huge slaughter and pork production are likely to keep pressure on the cash market. Seasonally, hog slaughter will remain heavy into year-end. But we anticipate the percentage change from year-ago should gradually ease. That should help alleviate some of the supply pressure on the market, though slaughter weights are rising and even with year-ago. If hog weights remain high, it will add some extra pounds to pork production.     

Cattle: Small gains on Friday pare lower weekly trend. December cattle gain 25 cents Friday to close at $119.25 and down 27.5 cents for the week.  November feeder cattle rose 22.5 cents to $147.00 and down $2.125 this week. Wholesale beef prices continues to strengthen Friday with Choice up 96 cents and Select gaining 49 cents. Sales continued moderately active at the higher money.  The demand for beef is extremely strong and cash cattle prices are mostly $2 to $4 higher this week. Slaughter was estimated at 651,000 head this week, down 7,000 head from a week ago but up 2,000 head from a year ago. The strong close to the cash markets this bodes well for next week.  Exports demand will be the key to the strength on the market heading into the year end. China has approved six new Argentine slaughterhouses and processing plants to handle the increasing amount of beef being shipped from the South American producer, according to Agriculture Minister Luis Etchevehere on Friday. Every meat producing country is ramping up discussion with China to meet the meat shortfall in the large consuming nation.      

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