After the Bell: Choppy Grain Trade Amid Mixed Weather Forecasts as Demand Worries Build

Posted on 07/17/2019 3:27 PM

Corn: Futures ended narrowly mixed today after a choppy session. September corn was up ¾ cent to $4.36 and December gained ¼ cent to $4.41 ½. Prices were supported by perceptions that U.S. acreage may decline in the August 12 report while yield remains under pressure from the upcoming very hot temperatures. However, a storm that moved out of South Dakota held together as it moved through parts of Iowa and Minnesota today, providing a nice drink ahead of the heat. Also, the heat is expected to end by Monday for most of the Midwest and there are some forecasts suggesting more showers next week. Prices also found early support from our report that data gatherers suggest that RMA insurance policy and indemnity numbers as of July 15th show Prevent Plant in corn will be 7-8 million acres, with soybeans reaching upward of 2-3 million and may rise further. Some clarity will be found via FSA’s initial prevent plant numbers in mid-August, but amid elevated PP claims, a more accurate picture of planted, failed and prevent plant acres won’t be available until October or November The market’s gains were also held back by worries about demand. Prices slumped overnight in Brazil and further increased the U.S. premium in the world export markets.

Soybeans: Soybean futures traded in a fairly wide trading range today, with futures enjoying gains for much of the day session. But the market ultimately settled low-range and down 5 to 6 cents. Soy products also finished in the red after a two-sided day of trade, with soymeal around $1 lower and soyoil down 31 to 35 points. November soybean futures uncovered buying interest on an early test of support at the $9.00 level this morning, but the market also encountered resistance at the 100-day moving average, sending prices back down. Continued uncertainty about crop potential and trade relations with China will likely contribute to more back and forth action ahead. The Eastern Corn Belt received welcome rains yesterday and pop up showers are occurring in the western Belt today. Beans were planted incredibly late this season, meaning acreage is very much a question mark, let alone yields. Our sources say USDA has a running tally of between 2 million and 3 million prevent plant soybean acres at this time. That said, ample 2018-19 ending stocks mean the supply situation for soybeans is a different story than that for corn, capping the market’s rally potential to some degree.

 Wheat: Wheat futures finished low-range with losses of around 2 cents in SRW and HRS contracts and around 4 cents in HRW contracts. Wheat futures drifted lower today amid seasonal pressure, as winter wheat harvest progresses. Strength in the corn market helped limit selling in wheat, but corn futures trimmed gains into the close, which led to the low-range finish. Unless some fresh supportive news surfaces or buying in the corn market increases, wheat futures are vulnerable to followthrough selling. To offset the seasonal pressure, wheat needs positive demand news. Export inspections are off to a strong start compared to last year, but last year was a very poor export year. The fact of the matter is major exporters have plentiful supplies and export competition from them will remain strong, especially with U.S. prices at a premium. That limits near-term support from fresh export sales.  

Cotton: Cotton futures dropped 23 points in the October contract and 53 points in the December. Both hit new contract lows today. Worries about slowing global economic growth is leading to concerns about demand for cotton worldwide. Some reports say the Indian yarn trade is slowing due to weakening world economic growth. However, other economic data, such as stronger U.S. retail sales reports, suggest cotton prices at present levels may be a value buy.Recent good rains in cotton country, including Texas, continue to keep cotton futures buyers on the sidelines.Traders will closely examine Thursday morning’s weekly USDA export, with bulls hoping for a pick-up in U.S. cotton new-crop sales and old-crop shipments.

HogsLean hog futures prices ended with strong gains—up the $3.00 limit in the August and up $2.525 in the October contract, which gapped higher on the daily bar chart and hit a four-week high. Rising cash hog prices and pork cutout value this week are supporting speculation that cash markets have bottomed and will continue to rise. The pork cutout rose another $1.37 at midday today, on across the board gains in all cuts. Movement tapered off, at 173.69 loads. Traders are optimistic recent price gains signal consumers see pork as a relative value and/or that export demand for the meat is picking up. Meanwhile, cash hog bids climbed 75 cents on Tuesday. Average hog weights in the Iowa/southern Minnesota market edged 0.2 lbs. lower the week ending July 13, but weights are still up 3.5 lbs. from year-ago. The hog market’s counter-seasonal trend may indicate a rally into the fall, like 2018. China's pork prices continued to rise in June, up 29.8% year on year in June, mainly because of African swine fever, according to Ministry of Agriculture and Rural Affairs. The market is looking for greater demand for imported pork in the second half of the season.

Cattle: Cattle closed lower but well above session lows. August cattle fell 10 cents to $108.125 with October sliding 50 cents to $108.125. Feeders closed down 47.5 cents to $1.15. Lower beef prices this morning amid strong sales sent a mixed message to the futures market. There was some light cash cattle trade Tuesday at steady money with last week and today’s Fed Cattle Exchange auction sold 326 steers and heifers for $111, which is not comparable after several weeks of no sales but slightly weaker than the average prices last week. The market will be eager to see how trade develops the rest of this week but the downside in cash cattle prices is limited. That will eventually lend some support to the discounted August futures. Trading may continue slow until after Friday’s USDA Cattle on Feed Report is released.  Traders polled by Reuters expect the report to show feedlot supplies are up 1.8% from a year ago on July 1 even as placements fell 2.3% in June. Marketings fell 3.1% below a year last month. 

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