After the Bell: Beans Rally, Corn Slides in Pre-Report Positioning, Drier Forecasts

Posted on 08/09/2019 2:44 PM

 

CornDecember corn futures lost 1/2 cent today after hitting a two-week high early on. For the week, December futures gained 8 1/4 cents. The highlight of the trading week next week occurs right out of the gate: Monday morning’s USDA monthly supply and demand report. Underlying support this week came from trade expectations for USDA to cut the size of the U.S. corn crop Monday. Traders polled by Reuters forecast corn production would fall to 13.193 billion bushels, down from 13.875 billion bu. projected by USDA in July. Unprecedented planting delays followed by improved growing weather in July have traders expecting a wide range of acreage and yield outcomes in Monday’s USDA report. The question is whether improved crops in the west will offset the problems in the eastern Corn Belt. Grain market trader could see additional bearish news in the coming week, amid wobbly stock and currency markets. Fears of a further escalation in U.S./China trade tensions have pressured global stocks. President Trump said Friday that the United States was continuing trade talks with China but was not going to make a deal for now.

Soybeans:  Beans extended this week’s rally. November gained 8 ¾ cents to close at $8.91 ¾ and up 23 ¼ cents for the week. December soybean meal rose $1.70 to $303.70 and up $4.30 this week. December soybean oil jumped 57 points to 29.95 cents and touching the highest since April 15. The uncertainty surrounding Monday’s USDA August crop report is causing traders to consider reducing relatively large net-short positions. Fund short covering in soybeans is underpinning the market. Amid farmers that have closed their bin doors, the market is adding some weather premium back into the futures price structure.  There is a key area of the Midwest from eastern Iowa to Ohio that needs rains very shortly or crop stress may rise to levels that will be difficult to repair. Sunday night’s price direction will depend on where weekend rains fell and the next two-week weather forecast. It does look likely to get warmer with more limited rains after some showers this weekend and early next week. Soybean oil futures rose above the 200-day moving average as world vegetable oil prices are on a major rally after China said it would not impose quotas on imports this year. Chinese crushing activity has been curtailed by the outbreak of African swine fever reducing meal demand. But oil demand continues to grow. The market remains divided between supply bulls and the demand bears and they will continue to fight it out for the next two months based on weather forecasts and weekly export data.  

Wheat:  Wheat futures closed mixed on Friday and for the week. September SRW wheat gained a penny to $4.99 ½ and up 8 ¾ cents for the week. September HRW futures fell 1 ½ cents to $4.17 and down 4 ¾ cents this week. Spring wheat futures were slightly lower Friday and for the week.  Monday’s USDA Crop Production and World Supply & Demand Reports are not expected to have many changes from July but will continue to show plentiful U.S. and world inventories. That means wheat will be a follower of corn and what USDA has to say about U.S. and world supply. HRW wheat is already priced as a feed while SRW is finding support from better export sales to traditional Asian and Latin American customers.  The focus will be on the yields from the U.S. and Canadian spring wheat harvests into early September. Scattered rain has slowed the start of this year’s harvest. European wheat export sales are lagging a year ago and they will likely start lower bids to gain some market share.   

Cotton:  December cotton futures closed down 73 points at 58.85 cents today. For the week, December futures lost 52 points. Look for some follow-through selling pressure in the cotton futures market Monday, following today’s weaker close and the still-bearish technical picture for cotton. Very wobbly world stock and financial markets are also a bearish outside element for the fiber. Monday’s USDA monthly supply and demand report will likely be the highlight of the trading week for the cotton market. A drop in U.S. crop ratings halted rising production ideas as scattered rains and hot temperatures have increased crop stress. Extended weather forecasts for the rest of August do suggest warmer temperatures in the southern U.S., which could further reduce crop ratings the next few weeks.

Hogs: Hog futures closed mixed on Friday and up for the week. October Lean hogs were down 90 cents today to $66.975 but up $1.15 this week. December hogs fell 57.5 cents to close at $64.675 and up $1.425. Pork cutout values rose 91 cents at midday, led by gains in hams and bellies. Sales were moderate. Packer margins improved to $25.45 per head this week from $4.00 a week ago, according to HedgersEdge.com. Slaughter this week was estimated at 2.354 million head, up from 2.351 last week and 2.341 million a year ago. The slowdown in slaughter may help the cash hog market begin to firm again next week after this week’s retreat. President Trump suggested this morning the U.S. and China may not hold a Washington, D.C. trade meeting in early September. He also said he was not yet ready to make a deal. U.S. pork export sales last week rose 55% from the prior week’s anemic tally but were down 13% from the four-week average, USDA reported Thursday. China bought just 1,400 metric tons last week. Shipments remained relatively active with China the top destination.

Cattle:  August live cattle closed up a dime, while October futures closed steady. For the week, October live cattle lost $1.075. November feeder cattle futures closed down $1.20 today and for the week lost 15 cents. The rally in beef prices this week and an improvement in weekly beef export sales may set the table for higher cattle prices next week, especially since prices moved well up from Monday’s spike low that suggested the bears had become exhausted. Cash cattle trade will need to lead futures higher in August, but some traders remain skeptical with futures trading at large discounts to the current cash market. This week’s carcass weight data confirms very current feedlots, with steer weights reported five pounds below a year ago. The Choice-Select grade spread also signals very tight supplies of choice and prime grades. That will continue to lend support to the cash market, but packers refuse to share the profits.

 

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