After the Bell: Bullish USDA Inventory Report Sends Corn, Soybeans Higher

Posted on 09/30/2019 2:47 PM

Corn:  December corn futures closed up 16 1/2 cents at $3.88 and hit a six-week high. Prices also closed at a bullish monthly high close today, the last day of the month. Today's bullish upside breakout and monthly high close suggest some decent follow-through technical buying on Tuesday and possibly the rest of this week. The corn market bulls were surprised with a bullish quarterly grain stocks report issued this morning. U.S. corn stocks were pegged at 2.114 billion bu., whereas the trade expected 2.428 billion. Old-crop corn stocks at the end of the 2018-19 marketing year are down 1% from year-ago and 314 million bu. below the average pre-report trade estimate. The corn stocks at the end of the marketing year were 184 million bu. below the lowest pre-report trade estimate. Now, traders await next week’s monthly USDA supply and demand report. Yield reports from early harvest remain variable and down from year-ago but there’s still not enough data to confirm the smaller crop we measured on Crop Tour in August. This afternoon's weekly crop progress report is expected to show 14% of the corn crop harvested versus 26% at the same time last year. The crop in "good to excellent" condition is expected to be at 57%. Heavy weekend rains fell across the Central Midwest, with totals ranging from 2 inches to 6 inches. The extreme rain produced mud and some isolated flooding, which has halted harvest from Missouri into Ohio.

Soybeans:  Prices surged to the highest since July, erasing overnight losses and closing above short-term resistance. November soybeans gained 23 cents to $9.06. December meal gained $5.90 to $301.00 and December soyoil futures rose 24 points to 29.08 cents.   USDA threw a bullish surprise at the market today, halting a string of bearish reports and catching the funds leaning on large short positions. Old-crop soybean stocks pegged by USDA at 913 million bu. were 69 million bu. below the average pre-report trade estimate and 27 million bu. below the lowest pre-report trade estimate. Soybean stocks stored on farms totaled 265 million bu., up 162% from last year, and off-farm stocks at 648 million bu. are up 92% from last September. Implied disappearance in the final quarter of the 2018-19 marketing year was a record 870 million bu., up 11% from the same quarter last year. USDA said the smaller Sept. 1 stocks means it overestimated the 2018 soybean crop by 116 million bushels. Planted acres from 2018 are now put at 89.2 million with harvested acres at 87.6 million, down from 88.11 million in the Annual Production Summary last January. The 2018 bean yield is put at 50.6 bu. per acre, down a full bushel from the government’s January forecast. Last year was supposed to be a record crop and USDA overstated it. That has raised questions about this year’s crop forecast, which the agency will be updating Oct. 11. While carryover supplies on September are still more than double a year ago and record large, the market now must consider what impact the adverse weather had on this year’s yields.

Wheat:  Winter wheat futures extended gains a bit in the wake of USDA’s reports, with futures closing 6 ¾ to 8 ¾ cents higher on the day. Spring wheat futures also extended gains in the immediate aftermath of the reports, but the market softened ahead of the close to settle 1 ¾ to 2 cents lower. Wheat traders got a mixed bag of data from USDA today. On one hand, the department “set” the all wheat crop at 1.962 billion bu., which was 6 million bu. lighter than anticipated and 18 million bu. under year-ago levels. Other spring and durum wheat production topped expectations, but other major categories came in smaller than anticipated. And this may not be the final word on production. USDA plans to resurvey spring wheat producers who had unharvested acres as of its last survey, but any adjustment based on that effort won’t come until the Nov. 8 Crop Production Report. Buying was also limited by Sept. 1 wheat stocks that were 67 million bu. higher than analysts anticipated. Market action today indicates traders believe damage to the spring wheat crop from a winter storm over the weekend has already been factored into prices. That said, the market continues to hold above the 100-day moving average.

Cotton: Cotton futures finished down 4 to 8 points through the May contract, though that was near the session highs. While there was a lot of price movement and active trade in the grain and livestock markets to kick off the week, the cotton market was quiet. There wasn’t any cotton data in USDA’s reports this morning and other news was limited. Still, the cotton market was able to work off its earlier lows thanks to strength in the grain and soy markets. The weather picture for the U.S. cotton crop is mixed. Conditions are too wet in West Texas and the forecast suggests more rains will be seen into next week. That is causing concerns with yields and crop quality in that region. But from eastern Texas through the Southeast, conditions are largely dry. That’s allowing for rapid crop maturation and harvest activity in those states.  

Hogs:  Futures closed higher near their daily highs after opening with moderate losses. December hogs rose $2.75 to $72.60 and February futures rose $2.20 to $78.00. Hog futures rebounded from early losses tied to the bearish USDA Hogs & Pigs report on Friday. USDA estimates the U.S. hog herd at a record 77.678 million head as of Sept. 1, up 2.542 million head (3.4%) from last year. That was 410,000 head more than the average pre-report estimate implied. The market hog inventory came in 0.5 percentage point higher than expected at 3.5% above year-ago. Underlying support quickly developed this morning on expectations for increased Chinese purchases of U.S. pork. China's supermarkets are trying to fill their meat counters with frozen pork sold from state reserves, after prices surged to record levels, pulling beef and chicken to new highs, threatening to mar this week's National Day festivities.  The rapid spread of African swine fever across Asia the past three months argues for stronger exports to the entire region.  

Cattle:  October live cattle futures finished down $0.45 at $104.575. December live cattle closed down $0.275 at $110.30. November feeder cattle futures ended off $1.05 at $141.925. The solid price rebounds in the cattle futures markets have given the bulls some technical momentum to suggest continued sideways-to-higher price action in the near term. Firmer cash cattle trade to end last week is leading to ideas packers will pay up for cattle again this week. Cash cattle trade held off until late on Friday. Sales in the south were quoted steady for the week at $103, while trade in the north was $4 to $5 higher at $106 to $107. The noon beef report today showed carcass cutout value up 21 cents on Choice and down 79 cents on Select grade. Movement was light at 45 loads. The worry among cattle market bulls continues to be larger slaughter levels that will need improving demand for futures can cash prices to continue to firm.  

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