After the Bell: Corn, Soy Slump on Weather, Positioning for USDA Nov. 8 Reports

Posted on 11/05/2019 3:31 PM

Corn: Corn futures closed slower and in the bottom third of today’s price range. December corn fell 1 ½ cents to close at $3.81 ¾. Tuesday’s corrective rebounded lasted overnight but traders came back in this morning holding short positions and looking to press the market below key support at last month’s lows ahead of the USDA Crop Production and WASDE reports Friday morning. Traders surveyed by Reuters expect the U.S. corn yield to fall to 167.5 bu. per acre on average from last month’s USDA forecast of 168.4 bu. per acre. The Doane/Pro Farmer estimate is 166.8 bu. per acre. The national corn harvest was reported 52% done as of Nov. 3, well behind the 75% average the prior five years. Truck lines are long with many waiting to dump at the dryers. Market bears seem unkerned about potential field losses with just over half the crop left to collect. Weather leans negative, as rains are expected to shrink the dry areas in Brazil and Argentina this week and next while the majority of the U.S. Midwest enjoys mostly dry and cold weather for better harvest.

Soybeans: Soybean futures finished in the lower end of today’s range with losses of 3 to 4 1/4 cents through the November 2020 contract. Meal futures gained 10 to 30 cents, while soyoil dropped 29 to 30 points. Soybean futures retreated from Monday’s modest gains today, as traders showed no willingness to move the market too far in either direction ahead of Friday’s USDA reports. Traders expect USDA to lop around 40 million bu. off its soybean crop estimate this month, with ending stocks expected to drop 32 million bushels. Pre-report positioning is likely to keep price action light and directionless ahead of Friday’s reports. South American weather has improved with recent rains in Brazil and Argentina. But both countries still have dry areas and more rains are needed after a dry first month and a half of the planting season. Dryness is of greatest concern in south-central and northeastern Brazil and southern Argentina. The main central growing regions of both countries have seen enough rains the past week-plus to at least temporarily improve soil moisture.

Wheat: Winter wheat futures finished mostly 3 to 5 cents higher. Spring wheat futures ended with a narrowly mixed tone. Wheat futures modestly favored the upside through today’s trade. Much of the price action was pre-report positioning ahead of Friday’s Supply & Demand Report from USDA. Traders on average anticipate a slight reduction in new-crop ending stocks, but the range is a 40-million-bu. reduction to a 30-million-bu. increase. More light pre-report trade is expected the next two and a half days ahead of the report data. Egypt purchased 120,000 MT of French wheat and 55,000 MT of Russian supplies in its latest tender. Prices were generally $2 to $3 below Egypt’s previous purchases. No U.S. wheat was offered. A lack of substantial export demand for U.S. wheat remains a hurdle bulls must clear.

Cotton: Cotton futures continue to hold within a sideways trading range. Futures ended little changed for the day, with the front two contracts up 15 to 20 points and deferred months marginally lower.  The cotton market has chopped sideways in recent weeks as the market continues to wait for more details on whether Phase 1 of the U.S./China trade deal will include Chinese imports of U.S. cotton and for USDA’s updated crop estimates this Friday. Analysts polled by Bloomberg expect little change to USDA’s 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. In its weekly crop progress and condition report yesterday, the department reported harvest has moved past half complete. But related state updates noted that some dryland cotton in Texas is being plowed under.

Hogs: Lean hog futures reversed course today and worked higher through the day. The front-month closed $2.75 higher, while deferred months posted gains ranging from $1.00 to $1.85.  Momentum seems to point toward the completion of Phase 1 of a U.S./China trade deal, but there’s still a lot of uncertainty about how the $40 billion to $50 billion in purchases of ag goods China promised to make will actually play out. Given aggressive slaughter rates, strong export demand is needed to prevent pork supplies from overwhelming the market and depressing prices. China has already dramatically hiked purchases due to an outbreak of African swine fever, but the market needs even more dramatic sales tallies. Canada’s announcement that China has reopened its market to Canadian beef and pork serves as a reminder that China will need to import a lot more meat.

Cattle: Live cattle ended mixed with weakness in the front contracts while feeders followed lower. December cattle were down 62.5 cents to $119.45 with November feeders sliding $1.225 to $147.85. Very limited cash trade Tuesday and overbought technical signals allowed futures to drift after the recent strong 20-plus percent rally. The futures premium to the current cash market is about the only negative. Midday wholesale beef prices were higher again today, with Choice up $1.81 and Select rising $1.10. Sales were moderately active.Packer demand for Choice and Prime beef is set to rise through the year-end holidays. That will keep a firm tone to wholesale beef prices and encourage packers to continue to operate at full capacity. Once the Tyson plant in Kansas is reopened in January that could support a strong cash cattle rally to start 2020.

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