After the Bell: Corn Leads Lower on Bearish USDA Crop Production Forecast

Posted on 08/12/2019 3:01 PM

Corn: Corn futures settled down the 25-cent daily trading limit in the September through May 2020 contracts. Daily trading limits expand to 40 cents for Tuesday. The synthetic price on the close would suggest corn will open around a nickel lower in overnight trade. Corn traders reacted negatively to USDA’s August crop reports, which estimated crop size around 700 million bu. bigger than traders expected and new-crop ending stocks 561 million bu. higher than anticipated. Those are huge misses that rocked the market, which is why futures reacted with a limit-down performance. While many farmers may not believe USDA’s data, that’s the best information traders have at this stage. This also puts a lot of focus on the Pro Farmer Midwest Crop Tour as we will gather samples from seven Corn Belt states next week. USDA’s August crop estimate did not include objective field samples this year – just farmer surveys and satellite imagery. That means Crop Tour will provide the first broad field samples of the crop this year. What matters now is how many acres are harvested for grain and the yield, as those two variables determine production. Given the lateness of this year’s crop, either of them could shift rather significantly from the initial estimates today. The size of this year’s corn crop is likely to be debated well into harvest.

Soybeans: Soybean futures lost around 12 cents in the nearby contracts today, with meal down close to $5.00 and bean oil 8 to 13 points higher in the nearby contracts. Soybean traders did not get a dose of bearish news in today’s highly anticipated monthly USDA supply and demand report. However, the pounding seen in corn and wheat futures spilled over into selling pressure in soybeans. USDA’s first soybean crop estimate came in 120 million bu. below what traders anticipated and 165 million bu. below the July projection. After resurveying 14 states, USDA estimated U.S. planted soybean acreage at 76.700 million, down 3.34 million acres from June. USDA estimates harvested soybean acres at 75.866 million acres, down 3.4 million acres from June. USDA estimated the national average soybean yield at 48.5 bu. per acre, unchanged from the July projection. Old-crop soybean carryover climbed 20 million bu. from last month. USDA made no change on the supply-side of the 2018-19 balance sheet, but it cut estimated crush by 20 million bu. (to 2.065 billion bu.) and estimated seed use by 4 million bushels (to 89 million bu.). That was partially offset by a 3-million-bu. increase in estimated residual use. New-crop soybean carryover dropped 40 million bu. from last month on USDA’s dramatic cuts to estimated 2019 bean plantings. USDA left the 2018-19 and 2019-20 national average on-farm cash bean prices unchanged from July, at $8.50 and $8.40, respectively.

Wheat: Wheat futures tumbled after the USDA reports, with most HRW and spring wheat futures setting new contract lows. December SRW wheat fell 25 ¼ cents to $4.76 ¼, while December HRW fell 24 ½ cents to $4.09 after touching a new low at $4.04 1/4. Spring wheat for December delivery fell 8 ¾ cents to $5.22. Wheat prices fell after USDA’s increase in the national average wheat yield boosted total supplies by 59 million bu. from last month. On the demand side, USDA cut estimated food use 5 million bu. to 960 million bu. and increased estimated feed & residual use 20 million bu. to 170 million bu. Estimated 2019-20 wheat exports were also increased 25 million bu. to 975 million bushels. The 40-million-bu. increase in total wheat use resulted in a 14-million-bu. increase in ending stocks. Still, USDA cut the estimated national average on-farm cash wheat price for 2019-20 to $5.00, down 20 cents from July. The USDA world wheat production forecast was reduced million metric tons (MMT) from a month ago but still left global output up 37.5 MMT from a year ago. Despite strong consumption, world inventories are set to rise 9.9 MMT to a record 285.4 MMT this year.

Cotton:  December cotton futures closed down 76 points at 58.14 but off the day’s low of 57.55 cents.  USDA’s initial U.S. cotton crop estimate was 526,000 bales higher than traders were looking for and 4.15 million bales higher than a year ago. USDA increased its cotton planted acreage estimate by 183,000 acres, to 13.903 million acres. USDA estimates harvested cotton acreage at 12.637 million acres for a harvested percentage of 90.9%. USDA estimates the national average cotton yield at 855 lbs. per acre, up 10 lbs. from last month. USDA estimated Texas cotton yields at 662 lbs. per acre, down 95 lbs. from last year. The Georgia yield is estimated at 932 lbs. per acre, up 213 lbs. from last year’s hurricane-damaged crop. World production is seen up 6.4 million bales to 125.6 million bales this month from a year ago. Meantime, total consumption may rise 2.5 million bales from last year and ending stocks may rise 2.2 million to 82.5 million.

Hogs: August lean hogs closed up 15 cents at $79.175 today, while October futures gained a dime and closed at $67.075. The hog futures market fared pretty well today, given the limit losses in cattle futures and heavy losses in the grains. Hog traders cite strong pork and packer margins that may help to stem the recent losses in the cash hog market. Packer margins are estimated at $29.25, up from $11.50 a week ago, according to HedgerEdge.com.  Also, the noon pork report showed carcass cutout value up a solid $2.99, led by gains in bellies. Movement was 127.14 loads.Cash hogs were lower Friday and last week, limiting buying interest in futures today. Slaughter was 3,000 above a week earlier last week and 13,000 head larger than a year ago. resistance is seen at today’s high of $69.12 and then at $70.00. First support is seen at $66.00 and then at today’s low of $65.00.

Cattle: Live and feeder cattle futures dropped their respective $3.00 and $4.50 limits on the open and maintained those losses through the close. Limits expand to $4.50 for live cattle and $6.75 for feeder cattle futures tomorrow. A fire destroyed part of a Tyson Foods beef processing plant near Holcomb, Kansas on Friday, causing major disruption of the cattle sector. The plant is one of Tyson’s largest, with a daily processing capacity around 6,000 head. The plant processes around 5% of total U.S. fed cattle, according to the founder of Sterling Marketing. Tyson did announce plans to rebuild and said that in the interim, cattle will be processed at other plants. But that will push processing near capacity at other locations. The fact that marketings were current heading into this supply-disrupting event helps blunt the impact to some degree. But an extended closure would have major ramifications on the flow of cattle and beef supplies. We still don’t have a definitive timeline for when the plant will come back online. Adding to the pressure is the resulting delivery of shorts against futures.

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