After the Bell: Choppy Trade after Recent Rallies Run Out of Fresh Bullish News

Posted on 10/21/2019 2:31 PM

Corn: December corn futures closed down 3 3/4 cents at $3.87 1/4. Prices closed near the daily low.  Some beneficial rains in Brazilian corn regions and some more in the forecast were deemed a bit bearish for the corn futures market today. March futures’ premium to the December contract has widened to 12 1/2 cents, the most in more than three weeks and a negative signal. The market remains pressured by sluggish export demand and slow U.S. ethanol production. Weekly USDA export inspections for corn, released Monday morning, totaled 531,744 metric tons (MT) in the latest reporting week, compared to 480,647 MT reported last week. These figures underscore the presently weak export demand for U.S. corn. U.S. weather will again provide some harvest interruptions this week through the weekend. Three fronts will come through over the next 10 days. Harvest progress tonight is expected to be 32% to 35% for corn. Farmers have been tight holders of new-crop corn so far this fall because many don’t need cash following MFP payments and expectations for smaller USDA crop forecasts in November and January crop updates. Both corn and soybean basis levels are tracking well above normal in most locations.

Soybeans: Prices closed mixed but down from session highs. November soybean futures fell ¾ cent to $9.33 ¼ while January beans fell ¾ cent to $9.46 ¾. Soybean meal futures were down 80 cents to $1.20 and soybean oil rose 12 to 13 points. Soybean futures started higher Sunday night on firmer Chinese markets on talk China may be done buying U.S. soybeans after scooping up at least 500,000 metric tons of Brazilian soybeans last week.  Chinese crushers may also wait until Phase I of the trade deal is signed, perhaps next month at the APEC summit in Chile. Calendar spreads were weaker today on a slight uptick in farmer sales after rains slowed harvest. The weekly export inspections report from USDA showed shipments rose to 1.296 million metric tons (MMT) from 955,000 MT a week earlier and above 1.218 MMT a year ago. However, China took just 70,333 MT last week, down from recent weeks.  More rain and cooler temperatures are needed to support soybean planting and development in Parana and the Mato Grosso Brazil. Some beneficial showers and cooler temperatures are expected during the next few days. Brazilian soybean farmers managed to erase a planting delay that was being reported since the start of the season, sharply advancing sowing from the previous week to be on a par with the average for the period, ARC Mercosul said on Friday. According to a report from the consultancy, farmers have planted 22.8% of the expected area by Friday, compared to 22.7% of a five-year average for the period. In the previous week, planting pace was at only 9.5% of the area, which raised concerns for the crop.

Wheat: SRW wheat futures climbed to their highest level since July and HRW wheat moved to their highest point since August in early trade, but the market was unable to sustain early gains and retreated for much of the day trading session. Winter wheat posted losses of 6 ¼ to 8 ¾ cents for the day. Spring wheat also finished low-range and down roughly 7 cents. Wheat futures were able to follow the trend higher overnight and early this morning, with corn futures also enjoying gains. But a reversal lower in corn weighed on the wheat markets as well, as an abundance of feed-quality wheat around the globe limits the market’s ability to rally on its own. Recognition of the global supply situation and the need for U.S. wheat prices to remain competitive has traders concerned about how much higher prices can climb. Wheat exports have been a bright spot, with inspections running 22.4% ahead of year-ago levels, according to USDA’s update today. Much of the recent support has stemmed from concern about dryness in Argentina, Australia, Ukraine, Kazakhstan and eastern Europe. Most recently, Rabobank forecast Australia’s crop will dwindle to 15.84 MMT, down nearly a third from the five-year average (see “Evening Report” for more). But the U.S. winter wheat planting season is off to a decent start, and global stocks are still expected to be plentiful.  

Cotton: Prices opened steady and slowly moved up to one-week high this morning and then quickly turned lower. December cotton fell 60 points to 64.56 cents. Cotton futures eased off a one-week peak on Monday as the dollar pared some losses from earlier in the session, while investors anticipated lower demand going into the harvest season and awaited clarity on U.S.-China trade. U.S. Trade Representative Robert Lighthizer says the U.S. target is to have Phase I of the trade deal with China by the time of the APEC meeting in Chile in mid-November, but still have some issues to resolve. Rain and thunderstorms moving through Texas and the southeast Delta are slowing harvesting for the next few days, but drier weather follows the next two weeks and should allow much more active progress. Prices drifted lower on speculation the moisture did not cause widespread damage but instead isolated crop losses. ICE cotton speculators trimmed their net-short position by 12,775 contracts, to 19,085 futures and options in the week ended Oct. 15. That’s the smallest since the week ended May 7. Commercials increased net-shorts to 28,521 futures and options, the most since mid-June.  Commercials were net long for the first time since back in August as prices were bottoming.  

Hogs: December lean hogs closed down $0.125 at $67.825. February hogs finished up $0.70 at $78.175. December hogs opened lower, tried to rally and then fell back to mid-range by the close. Prices are likely to remain stuck in a range of $64 to $72, basis December futures, until there is renewed strength in the cash hog market. The CME lean hog index has stalled out and is presently estimated to be at $65.53. The noon pork report Monday showed cutout value up $1.61, led by good gains in ribs, hams and bellies. Movement was light, however, at 111.54 loads. The hog futures market should remain supported by expectations for increased Chinese buying of U.S. pork and recent big U.S. export sales figures. If China needs pork, the U.S. has plenty to sell. Slaughter last week rose to a new high for the year of 2.726 million head, up 127,000 head from a year ago. Record slaughter levels are expected to continue and that will cap both cash and futures rallies.   China’s National Statistics Bureau indicated drawdowns in pork production in China were less severe than China’s ag ministry and analysts projected, which is adding uncertainty in the futures market. That uncertainty makes traders reluctant to add long positions.

Cattle: Live cattle futures finished steady to 47 1/2 cents higher. Feeder cattle ended steady to 35 cents lower for the day. Price action was quiet and two-sided in the cattle market today and is likely to remain that way. Traders are unlikely to be active buyers or sellers as they wait on cash cattle trade to develop and position themselves ahead of Friday’s Cattle on Feed Report.  October live cattle continue to trade at a mild premium to the cash market, with bigger premiums built into deferred contracts. That’s likely to limit buyer interest as traders wait to see if the cash market will strengthen again this week. The average cash cattle price was $109.73 last week, up 52 cents from the previous week. But there appears to be a sense that the cash strength may be nearing an end.  One factor that could keep the cash market supported longer is that packer margins remain deep in the black. That gives packers incentive to keep kill lines as full as possible.  

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