After the Bell: Choppy Grain Trading Session Ahead of USDA Reports on Friday

Posted on 06/25/2019 3:17 PM

Corn: Futures were mixed to mostly higher. July rose ¾ cent to $4.47 ½ and December gained ¼ cent to $4.57 1/2. Both contracts closed near session lows and more than a nickel off session highs Futures rose for a second straight day on Tuesday after the U.S. Department of Agriculture said the condition of U.S. crops deteriorated last week following rain and cool temperatures. USDA rated 56% of the U.S. corn crop in “good” and “excellent” condition, down from 59% last week and behind market expectations of 59%. Forecasts for warmer temperatures and less frequent and only light showers the next 10 days may aid early crop development, limiting fresh fund buying. Funds have moved from a record net-short position of 322,000 futures and options in late April to a net-long position of 143,500 as of last week. That’s a major swing and it will likely take more data confirming a smaller crop potential in July to encourage funds to add to current length.  

Soybeans: Soybean futures closed down around 6 cents today and near daily lows. Meal finished down around $2.00 to $3.00 and bean oil was down 38 points in the July contract. The soybean market traded both sides of unchanged today until around midday when prices dipped to daily lows about the same time news reports surfaced that suggest the Trump administration is playing down any significant breakthrough at the late-week summit meeting between U.S. President Trump and Chinese President Xi. The reports were saying a more likely outcome to the meeting between the two will be an agreement to keep the talks ongoing. U.S. soybean planting lagged expectations at 85%, the USDA crop progress report said Monday afternoon. Last year, planting was complete at this time and the five-year average stands at 97%.  Emergence is lagging the five-year average by 20 percentage points at 71%.  Soybeans’ first rating of the season was worse than expected with 10% rated “poor’ and “very poor” and 54% in “good” and “excellent” condition. However, warmer, drier weather forecast for the Midwest superseded the disappointing planting progress and crop conditions data, on ideas farmers will plant a few more soybean acres and crops will show some improvement.

Wheat:  Soft red winter wheat futures prices lost just over 2 cents today, while hard red winter contracts ended fractionally mixed. Spring wheat closed 3 to 5 cents higher. Buying interest in wheat futures was limited today by reports of improving weather conditions in European wheat regions and ideas of decent harvest progress to occur in the U.S. in the coming days. USDA weekly crop progress data released Monday afternoon showed U.S. winter wheat harvest advanced just seven percentage points to 15% complete as of Sunday, which is well behind 34% complete for the five-year average. But warmer, drier weather will aid harvest progress the next 10 days. Recent rains benefited wheat in parts of the Canadian Prairies, but more will be needed amid low subsoil moisture reserves.

Cotton: Cotton futures settled 3 to 29 points higher in all but the front month after a quiet day of trade. The July contract settled 10 points lower.  The cotton market appears to be marking time heading into week’s end, when the flow of news should pick up dramatically. On Thursday USDA will release its weekly update on export sales and then on Friday the department will put out its June Acreage Report. Traders surveyed by Reuters expect a modest uptick in planted acreage versus March intentions to 13.819 million acres, which would still be down from last year’s 14.099 million acres. Also at week’s end, much-anticipated talks between the leaders of China and the U.S. take place in Japan. While a deal seems unlikely, a truce on tariffs would be welcome news for the cotton sector. USDA’s crop progress and condition update that was released yesterday got little attention from the market. It showed 96% of the cotton crop had been planted as of Sunday and 30% of it was squaring, with neither figure too far off the five-year average. USDA estimated 50% of the crop was in “good” to “excellent” shape as of Sunday, a point higher than last week and eight points higher than year-ago. The solid rating flies in the face of reports we have heard from the field about excessive rain and high abandonment.  

Hogs: Lean hog futures posted gains of $1.55 and $1.95 in the July and August contracts, respectively. Fall- and winter-month contracts ended moderately higher. Lean hog futures were supported by corrective buying today amid ideas the downside has been overdone. Until the cash market strengthens, the upside will be limited to modest corrective buying. And with funds still long over 31,000 contracts of hogs as of June 18, any corrective buyer interest will be light in nature. Cash hog bids continue to weaken, with the average national direct price falling another $1.59 this morning. Hog slaughter continues to run much stronger than USDA’s March Hogs & Pigs Report indicated and is expected to be around 2.4 million head again this week. Hefty slaughters and negative cutting margins limit packers’ willingness to bid up for hogs. Thursday’s Hogs & Pigs Report is expected to show the U.S. hog herd up 3% from year-ago. Just as importantly, traders expect the report to show hog producers plan to keep farrowing hogs at a greater-than-year-ago clip through summer and fall.  

Cattle:  Live cattle rebounded and feeders slipped lower. August live cattle rose 82.5 cents to close at $103.25, while August feeder cattle fell 45 cents to $131.325.  Cattle rose for a second session on speculation the recent decline was overdone, and cash cattle are near a seasonal low. Much of the buying was likely just light short covering as midday beef prices slipped lower. Choice fell 36 cents and Select declined 32 cents. Sales were moderately active.  Feedlots will likely hold for steady-to-higher money from packers this week after bids fell $3 on average last week. It’s probably time packers shared some of the $216 per head margin they are currently enjoying. U.S. consumer confidence tumbled to a 21-month low in June as households grew a bit more pessimistic about business and labor market conditions amid concerns about a recent escalation in trade tensions between the United States and China, according to the Conference Board.     

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