After the Bell: Corn Drops to New Lows on Slowing Ethanol Production, Expanding U.S. Harvest

Posted on 09/17/2018 3:13 PM

Corn: Futures finished 3 to 4 cents lower today and near their daily lows. New contract lows were established again today. The market saw increased selling pressure late on a news report major U.S. ethanol producer Green Plains is temporarily closing down two ethanol plants in Iowa and cutting production at one in Minnesota due to low profit margins. The corn market also remains pressured by the advancing U.S. harvest. But rain forecast for this week, some heavy in the western Midwest, may slow harvest efforts. Also bearish is forecast for rain for much of Argentina and Brazil the next week to 10 days, which would boost soil moisture reserves. Weekly USDA corn export inspections of more than 1.03 MMT for the week ended Sept. 13 were up from week- and year-ago levels but in line with market expectations.

Soybeans: Futures finished lower and in the bottom third of the daily price range with losses of 6 to 7 cents. November soybean futures fell 7 cents to close at $8.23 ½. December meal was down $3 to close at $305.70 while oil futures fell around 6 points. The market was pressured by early yields coming in very strong and supporting increased trader talk that national yields may exceed USDA’s record forecast release a week ago. Cash basis weakened again at Midwest processors on Monday. With President Trump advocating pressing forward with tariffs on an additional $200 billion of Chinese goods as early as this week and harvest picking up across the Midwest, pressure on the soybean market won’t ease anytime soon. Still, November futures did not forge new contract lows today, holding ¼ cent above last week’s lows. If support at last week’s lows falters, funds are likely to add to their short position which rose in the week ended Sept. 11 to 68,269 futures and options contracts, the most since January. Prices were also pressured by increased rains across Brazil and Argentina boosting soil moisture ahead of the planting season. Soybean meal continues to fall on concern about declining global meal demand amid increased cases of African swine fever in China, the biggest pork producing nation. Soybeans inspected for export in the week ended Sept. 13 fell to 784,752 metric tons from 926,332 a week earlier. However, shipments last week included 75,811 MT sent to Argentina to make up for drought-reduced crop last year. That’s another sign that U.S. beans are cheaper everywhere except for China crushers.

Wheat: Wheat futures saw two-sided price action today and the market ended split, with winter wheat contracts down roughly 3 to 5 cents and spring wheat futures 2 to 3 cents higher through the May contracts.  Wheat futures saw short-covering at times today amid some reminders of weather issues around the world. For one, the market is concerned that dryness in the European Union and Russia could prevent the crop from getting well established before cold temperatures move in. In addition, much of Western Australia was hit with freezing temperatures over the weekend, which may clip what had been expected to be a bumper crop for Australia’s largest wheat producing region. South Australia and Victoria also sustained some damage. Meanwhile, eastern Australia’s wheat crop prospects are down sharply due to historic drought, with no relief in sight for the next two weeks. But so far, these weather issues have yet to result in strong demand for U.S. wheat. Reminding of this sale weakness were weekly export inspections of 406,004 MT in the week ending Sept. 13, down from 468,703 MT a year ago. 

Cotton: Futures closed mostly lower and near session lows after failing to sustain early strength. December cotton closed down 52 points at 81.31 cents. Prices failed to hold early gains that may have been tied to the heavy rains across the Carolina’s from remnants of Hurricane Florence. Production losses probably will be small relative to the overall U.S. crop size.  USDA raised its forecast 447,000 bales from its August estimate last week. Export sales have been slow the past several weeks and traders are not looking for much improvement from Chinese buyers after new U.S. tariff threat on Chinese goods. President Trump’s expected announcement of new tariffs on $200 billion in China goods drew an immediate threat of reprisals from Beijing. While global cotton inventories as a percent of use are projected at the lowest in eight years, they are higher than almost every other year since the 2010-11 season.  Stocks represent 61% of global consumption, so there is no shortage of cotton in the world.

Hogs: October lean hog futures prices closed up 22 1/2 cents today, while the December contract finished down $1.275 and February was down $1.15. Lean hog futures saw pressure today from profit taking, especially given the premium futures prices hold to the Lean Hog Index. China reported another case of African swine fever during the weekend, although the news did not support futures today. It will likely take an escalation in the outbreak and increased China pork imports to significantly move the hog futures market. Flooding in North Carolina has stalled hog production in that region, suggesting a pending demand surge in the region. But the immediate result has been a sharp decline in slaughter rates. Pork product prices rose 70 cents at midday. Movement was light at 90.36 loads. Cash hog prices were reported up an average of $1.57 today.

Cattle:  Live cattle futures finished mixed to mostly firmer. October live cattle finished 37 1/2 cents lower, while the December through June contracts posted gains of 5 to 40 cents. Feeder cattle also ended mixed with an upside bias.  Cattle futures faced profit-taking at points today, but buyers were relatively scarce following higher cash cattle trade late last Friday. The average cash cattle price was $110.66 last week, up $2.99 from the previous week. While there’s hope firmer cash prices will be seen again this week, October futures started today at more than a $3 premium to that level and finished $2.765 above it. That’s likely to temper buying in the lead contract until there’s clearer direction from the cash market later this week, especially with USDA’s Cattle on Feed Report out Friday afternoon. Cash feeder cattle prices traded $2 to $6 higher at the Oklahoma City auction on strong demand, fueled by gains in live cattle futures last week. The feeder cattle strength may be a precursor for fat cattle trade later this week. Boxed beef prices started the week on a strong note, with Choice rising $1.94 and Select up 71 cents this morning, though movement was light at just 41 loads. Choice boxed beef prices are back to levels where they stalled early last week, so whether or not packers are able to push them higher could be telling.

Add new comment