After the Bell: Wheat Surge Pulls Corn Higher as Shorts Run to Cover

Posted on 11/29/2019 1:09 PM

Corn: December corn futures surged 8 1/2cents to $3.71 1/4 today and March futures rose 8 cents to $3.81 1/4. Both contracts closed near their weekly highs after sinking to six-week low on Wednesday. December corn rose 2 ½ cents this week with March corn up 2 ¾ cents.  There were no deliveries against the expiring December contract Friday and futures spread firmed as did cash basis. The technical chart posture improved with today’s surge in prices, which suggests chart-based sellers, including the big speculative funds, may have reached their discomfort level selling weakness with exports slowly improving. USDA reported today that 806,800 metric tons (MT) sold last week, up 34% from the prior four-week average. A winter storm pounded areas of the northern Corn Belt, further hampering the harvest of what corn left in the field. USDA’s latest update signaled there were around 13.1 million acres of corn left to be harvested as of Nov. 24. The national average cash corn basis slipped 1/2 cent over the past week but is still above December futures. Traders have determined it’s the cash market’s job to deal with late-season harvest losses.  

Soybeans: January beans fell 5 ¼ cents to close at $8.76 ¾ on Friday touching a new 2 ½-month low.  Prices fell 20 ¼ cents this week. January meal lost $7.50 this week and January soyoil fell 1 point this week. Funds have likely fully liquidated their net long position in the soybean market and are beginning to open net-short position. t. After a heavy month of price pressure in November, the flip of the calendar to December may be enough to halt the fund selling.  But with South American weather improving, it may take signs the U.S. and China are on the verge of actually signing a trade deal to stop the speculative selling pressure.  South American weather and the U.S./China trade situation will dominate traders’ focus through year-end. Forecasts signal dry areas of Brazil will improve in early December. Barring an extended hot/dry spell, support in the soybean market must come from another source. Traders are likely to take a prove-it attitude on the U.S./China trade front after being duped into believing a trade deal was close multiple times in the past.  

Wheat:   Price rose today on technical buying triggered on concerns about tightening global supplies and continued light farmer sales that have tighten immediate supplies. December SRW futures surged 19 cents to close at $5.47 ½ cents and up 32 ¼ cents this week. December HRW futures rose 34 ½ cents this week to $4.38 ¾. December spring wheat gained 1 ¾ cents this week to $4.94 ½. Wheat production in southern Buenos Aires and La Pampa provinces is estimated at 3.4 million tons, down 37% from last season, the Bahia Blanca Grain Exchange says after a two-day crop tour that surveyed 220 fields.  Wheat planting in the region increased slightly y/y, but  yields are set to plunge 37% to an average of 2.2 tons/hectare. Meanwhile, French farmers had completed 80% of soft wheat sowing for next year's harvest by Nov. 25, up from 74% a week earlier, farm office FranceAgriMer said on Friday. Sowing remained well behind the pace last year when 99% of the area had been sown by the same week. The condition of already-sown soft wheat crops deteriorated for the second week in a row. An estimated 75% of soft wheat was rated good/excellent by Nov. 25 against 78% a week earlier. USDA’s last winter wheat condition rating of the fall was down a few percentage points from year-ago and frigid temperatures in recent weeks may have caused some establishment issues and possibly some winterkill. That said, with the crop entering dormancy and a break in weekly USDA updates until spring, attention has shifted to the demand side of the balance sheet. USDA reported export sales rose to 22.5 million bushels, topping trade estimates for 11 to 22 million bu., and the most in 13 weeks. Export commitments are up 9% from year-ago levels, but the pace of sales to reach the 950-million-bu. USDA projections is still 3% behind.   

Cotton: Cotton futures slipped Friday in a post-holiday shortend session as U.S.-China discord over Hong Kong reignited trade tensions. China threatened to retaliated against a U.S. law backing pro-democracy protesters in Hong Kong. March cotton fell 45 points on Friday to close at 65.36 cents and down 51 points for the week. The twists and turns of U.S./China trade talks will continue to garner the market’s attention, with cotton harvest running ahead of normal. Early next week, the market could spend some time reviewing Friday’s weekly export sales update. USDA reported net sales of 281,500 running bales (RB) for 2019-20 were up 24% from the previous week and 33% from the prior 4-week average. Increases primarily for Vietnam (74,100 RB, including 400 RB switched from Hong Kong), Turkey (67,800 RB), Bangladesh (46,400 RB), Malaysia (39,900 RB), and China (39,600 RB, including decreases of 29,900 RB), were partially offset by reductions primarily for Mexico (67,500 RB).  Export commitments are running 7% ahead of year-ago levels, whereas USDA is calling for an 11.8% year-over-year increase.  

Hogs: December lean hog futures closed up $1.35 on Friday to $62.025 and up 80 cents this week. February hogs rose $1.025 to close at $68.175 on Friday and up 52.5 cents this week. Lean hog futures are likely to remain in pause mode, assuming a trade deal with China isn’t finalized. Given premiums hog futures hold to the cash market, more sideways trade would likely be a semi-win for hog market bulls. The cash market firmed ahead of Thanksgiving as packers scrambled to secure as many hogs as possible ahead of multiple winter storms. Packers may ease bids coming out of holiday unless they find themselves short-bought on near-term needs. Midday wholesale pork prices rose $2.16 on Friday on light sales. USDA on Friday reported pork sales last week fell 15% below the prior four-week average at 25,600 MT, with China taking 5,400 MT and Mexico the top buyer of 18,000 MT. Sales for 2020 total 24,900 MT, including 17,700 MT sold to China.

Cattle: December live cattle futures closed down 22.5 cents at $121.20 and February live cattle declined 50 cents $126.20 and posted a contract high Friday.  January feeder cattle futures fell $1.05 to $142.275. February live cattle still gained $2.35 this week while January feeders rising $1.575. Live cattle bulls have positive fundamentals and technical on their side, which should continue to support higher prices in the near term. Cash cattle activity turned sharply higher in the $119 to $120 range late Wednesday as feedlots and packers looked to wrap up this week’s trade ahead of Thanksgiving. Those prices are up $3 to $4 from the average of nearly $116 the previous week. Given the surge in cash prices this week, it could signal a short-term top is nearing after weeks of strength in the cash market. The midday noon beef report Friday showed Choice grade cutout fell 4 cents and Select declined 61 cents. The Choice-Select spread widened to $22.17. USDA reported weekly beef sales rose 2% from the four-week average while shipments were down 1% from the prior four-week average. There are reports a U.S.-Mexico-Canada Agreement (USMCA) vote in Congress could come next week.   

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