After the Bell: Corn, Beans Finish on the Defensive on Chart Selling, Benign Weather

Posted on 11/06/2019 2:39 PM

Corn: Corn futures settled low-range and down 2 to 4 cents through the September contract. The front month uncovered support at the mid-October low and settled just above that level. Corn futures have drifted lower as traders are reluctant to add long or short positions heading into USDA’s reports Friday. More sideways to lower action is likely tomorrow, despite expectation for USDA to cut its U.S. corn crop estimate 136 million bu. to 13.643 billion bu. on reductions to both yield and harvested acres. That’s expected to cut the department’s carryover estimate by 112 million bu., though the market is also concerned about big cuts to ethanol use and exports given slack demand to date. USDA will provide another update on weekly corn export sales tomorrow, but no major uptick in business is anticipated. Dryness in Brazil has slowed soybean planting and spurred talk about reduced safrinha corn crop prospects in Brazil this season, but it’s still too early for that to provide more than underlying support.

Soybeans:  Soybean futures closed lower and near session lows, with soymeal leading lower with losses of more than 1% today. January soybean futures fell 6 ¾ cents to $9.27 1/2 with December soybean meal falling $3.80 to $298.90. After mixed dealings in overnight and early morning trading, the market headed south at midmorning on news a trade deal may be delayed amid trade worries about China’s demand for a rollback on tariffs. A meeting between U.S. President Donald Trump and Chinese President Xi Jinping to sign a long-awaited interim trade deal could be delayed until December as discussions continue over terms and venue, a senior official of the Trump administration told Reuters on Wednesday. The official, who spoke on condition of anonymity, said it was still possible the "Phase One" agreement aimed at ending a damaging trade war would not be reached, but a deal was more likely than not. China's latest push for more tariff rollbacks would be discussed but was not expected to derail progress toward an interim deal. The official said China was believed to see a quick deal as its best chance for favorable terms, given pressure Trump is facing from a congressional impeachment inquiry as he seeks re-election in 2020. The market was also pressured by dry and cold weather for finishing U.S. harvesting, which was 75% completed as of Sunday. Cash basis remained firm with farmers selling more corn than beans out of the field.  Recent rains and more in the forecasts the next two weeks in Brazil added to a negative supply story. Although there are parts of northeast Brazil and Paraguay and Argentina that remain too dry.

Wheat:  Winter wheat closed mixed and down from earlier highs. December SRW futures rose 1 ½ cents to $5.16 ¾ with December HRW wheat sipping ¾ of a cent to $4.27 ¾. Spring wheat futures were down about 3 cents. Prices rose in early trading on world crop concerns. Australia’s drought is resuming with little to no rain expected for the next couple of weeks. INTL FC Stone overnight estimated Australian wheat production at 15.5 million metric tons (MMT) vs. USDA’s 18.0 MMT estimates last month. This will reduce Australia’s wheat exports to 7.5 MMT, the lowest since 2007, according to the firm. A smaller crop is also likely in Argentina from ongoing dryness. Dryness will continue from eastern Romania and eastern Bulgaria through Ukraine to Kazakhstan through the next 10 days, leaving winter crops poorly established. Exports are relatively quiet and world prices have been softening, limiting advances.

Cotton:  December cotton futures closed down 12 points at 63.69 cents today and hit a three-week low. The cotton market is drifting sideways to lower ahead of Friday’s USDA monthly supply and demand report. Analysts polled by Bloomberg expect little change to USDA’s U.S. cotton production, export or ending stocks projections relative to where they stood in October. Changes to the global balance sheet are also expected to be minor. Traders will closely scrutinize Thursday morning’s weekly USDA export sales report, especially for any signs of stepped-up demand from China. The cotton market continues to wait on U.S.-China trade deal updates and timing for any signing of Phase 1 of the agreement. Next week’s trip to Brazil by Chinese President Xi Jinping may come too soon for him to sign a Phase 1 trade deal with the U.S., the South China Morning Post reported.  

Hogs:  December lean hogs fell $2.50 today to close at $64.775. February futures lost $0.975 at $72.775. Hog futures market can’t shake the bearish specter of recent large slaughter levels that are also weighing on cash hog prices. The pork cutout value fell 4 cents at midday today after rising $3.11 the first two days of this week. Sales were moderate at 186.76 loads at noon today. Buying interest in futures is also limited by futures’ premium to the cash hog market. The hog market is hoping for fresh Chinese buying in Thursday’s weekly USDA update after reports China lifted its ban on Canadian pork and beef imports and approved a number of French companies for meat exports to boost meat supplies curtailed by African swine fever. Also, China’s state-owned ag conglomerate COFCO agreed to purchased $100 million worth of pork from Danish Crown, Europe’s top pork producer, by the year 2020.

Cattle: Live cattle futures mixed with a downside bias after being under pressure much of the day. Feeders posted moderate to sharp losses. Corrective selling weighed on most live cattle contracts today as traders took some profits out of the long side of the market. Expectations for firmer cash cattle trade again this week limited seller interest, though December futures finished around $6 above last week’s average cash price. With that much premium built into the lead contract, additional corrective selling can’t be ruled out during Thursday’s session. Monthly export data showed the U.S. shipped 253.2 million lbs. of beef in September, which was down 6.9 million lbs. (2.7%) from last year. Shipments to Japan and Mexico were both down, while exports to South Korea increased. Through the first nine months of 2019, the U.S. has exported 2.274 billion lbs. of beef, down 86.4 million lbs. (3.7%) from last year. Of the top four destinations, only South Korea has imported more U.S. beef this year than it did through the first nine months of last year. In October, USDA forecast beef exports would decline 1.1% this year, but they are expected to increase 5.7% next year. Those figures suggest USDA anticipates a strong pickup in beef exports the final quarter of this year and next year as trade deals with Japan, South Korea, Mexico and Canada have a greater impact.

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