After the Bell: Corn, Soy Post Small Gains on China Trade Talk Optimism

Posted on 04/15/2019 2:32 PM

Corn: Corn futures enjoyed gains throughout the day and the market settled midrange with gains of 1 ½ to 2 cents. The latest Commodity Futures Trade Commission commitment of traders data show funds held a record short position in corn, which could provide fuel for a strong rally. But some sort of spark (maybe in the form of a U.S/China trade deal or weather) is needed to spark that surge given the abundance of corn stocks at home and around the world. And that is lacking right now.  U.S. and Chinese officials are reportedly hammering out final details of a trade deal, with two more top-level phone calls expected this week. But concrete details on what sort of ag purchases any deal might entail have been scarce.  Wet weather has planting off to a slow start and three more storms are expected to make their way across the nation’s midsection over the next two weeks. But recent history has shown that farmers can plant a lot of acres in a brief window of dry weather and moisture is a positive for early crop development. Plus it is still early in the season.  

Soybeans: Soybean futures ended the day up 3 to 3 1/2 cents and near mid-range. Soybean meal was up $3.10 in the nearby contracts. Bean oil closed down 16 to 18 points in the nearbys. Prices continue to find light short-covering on signs of progress toward a finalized U.S./China trade deal. U.S. Treasury Secretary Mnuchin said the trade talks are nearing their final round. Both sides will have conference calls this week to clear up the remaining issues and are “discussing whether more in-person meetings are necessary,” Mnuchin said. Private exporters today reported to USDA new export sales of 140,000 MT of soybeans for delivery to unknown destinations during the 2018-19 marketing year. Soybeans inspected for export fell to 460,667 MT last week, down from 888,650 MT a week earlier. That was at the low end of trade estimates and curb earlier gains. Today's monthly NOPA crush report for March came in about as we expected, at 170.011 million bu. Soybean oil stocks were pegged at 1.761 billion pounds, also right around what we expected in the report.The latest CFTC commitment of traders report showed funds reduced net-short positions by 2,855 contracts, to 71,314 futures and options last week, when most were looking for an increase in bearish bets. Still, the latest figure is the biggest bearish bet for this time of the year.  

Wheat: Wheat futures closed mostly down, led lower by the HRW market. SRW futures fell 5 to 5 ¼ cents, HRW was down 7 to 8 cents and spring wheat was ½ cent higher to 3 cents lower. Wheat was pressured by (dry?) forecasts for the HRW belt and showers falling in Ukraine, France and southeastern Australia during the weekend. Calendar spreads were mixed, the SRW gained on the HRW, but lost to the spring wheat futures. SovEcon bumped up their estimate of the new- crop Russian wheat production to 83.4 million metric tons (MMT) versus their previous estimate of 80 MMT. Domestic cash is mixed on the spring wheat, trying to stay firm on the HRW, and soft on the SRW. Wheat inspected for export fell to 18.8 million bu. in the week ended April 11 from 20.4 million bu. a week earlier. Total shipments since the marketing year began is 731.8 million bu. about 70 million bushels behind the pace needed to reach the USDA export projection of 945 million bu.  Top destinations last week were the Philippines and Nigeria. Managed funds were back selling today after cutting net-short HRW wheat positions for a second week in the last three to 47,793 futures and options, down from a record 51,380 on March 19. Funds were net short a record 54,269 contracts in the SRW market, down for a second straight week from a record short 73,508, CFTC data showed on Friday.

Cotton: Cotton futures worked off session lows late, but ended with sharp losses of 131 to 259 points.   Cotton futures worked higher early in today’s session, but failed to take out Friday’s highs, which triggered a wave of technical-based selling. Funds were sellers on the day, liquidating some of their net-long position that stood at roughly 15,000 contracts as of April 9. As support levels were violated, losses were extended. Fundamentally, traders will turn to this afternoon’s planting progress for price direction tomorrow. Cotton planting has been running about in line with normal in the early stages, so there’s unlikely to be any major surprises this afternoon. Portions of west Texas received needed rains over the weekend. However, northwestern areas of the state remain dry, though the dryness is not enough to spark concerns at this stage.  

Hogs: June lean hog futures closed down 37 1/2 cents, while July futures were up 7 1/2 cents. Both contracts are not far below last week’s contract highs. The hog market bulls still have strong fundamentals on their side. Last week, USDA reported a record 90,700 MT of pork sold for export, including a record 77,700 MT sold to China. Look for the solid potential of additional large China pork-buying in the months ahead to replace lost production because of African swine fever. China’s total hog herd dropped 18.8% in March versus year-ago, the country’s ag minister reported over the weekend.  Today saw a solid midday rise in pork carcass cutout value of $2.82. Bellies were the upside price leader. The sharp rise in cutout signals strong U.S. consumer demand for pork. Today's pork product movement was a light 90.64 loads. Higher cash hog prices are also boosting futures. The national average cash hog price rose $1.81, to $76.37, on Friday. Look for lighter hog slaughter this week due to the Good Friday holiday and Easter weekend, which will likely reduce some hog plants’ operations. On the U.S.-China trade front, U.S. Treasury Secretary Mnuchin said the Chinese trade talks are nearing their final round. Both sides will have conference calls this week to clear up the remaining issues and are “discussing whether more in-person meetings are necessary,” Mnuchin said.

Cattle: Cattle and feeder cattle futures end slightly to moderately higher and about midrange. June live cattle rose 2.5 cents to close at $121.475 and May feeders were up 52.5 cents to $151.025. It was not an impressive close but three separate attempts to move lower today uncovered fresh buying in the live cattle futures. That’s a sign that traders were looking for a steady to higher cash trade this week. There were cattle in the northern fringes last week that traded as high as $130 and plenty that sold for $124 in the South. The national negotiated cash average last week was $126.19, up 0.89 cents from the prior week and compared to $119.49 a year ago. The negotiated trade volume was the lightest in seven weeks at 78,000 head, yet packers’ net supply increased when adding in formula and contracted cattle. Today’s showlists, though, show numbers continuing to increase in availability in the South, but market-ready supplies are at least two weeks delayed to as much as six weeks behind schedule. Wholesale choice beef prices are more than $15 above a year ago on stronger demand for rib and loin cuts.  This week’s slaughter is estimated at 638,000 head--the largest yet this year. Some support for deferred futures continues from signs the U.S. and China are making progress on trade talks. This week, the U.S. and Japanese begin fresh trade talks. Both negotiations may lead to stronger U.S. beef export this year.  

Add new comment