After the Bell: Corn, Soybean Retrench After Strong Rally to Start This Week

Posted on 10/02/2019 2:21 PM

Corn: Corn prices closed lower but off the day’s worst levels. December corn fell 4 ¾ cents to $3.87 ¾.  The lack of fresh bullish news led to a correction to the strong two-day rally. Wet weather is expected to break by the weekend across the Midwest, ushering in some drier weather the next two weeks and improving conditions for harvesting. Yesterday’s rally did attract some new cash sales and basis was slightly weaker today to lend to the weaker futures undertone. Yield reports remain variable and down from year-ago, but recent data has been a little better. But it’s still too early to get a good handle on crop size and some traders are worried the full extent of this year’s historic flooding won’t be available when USDA releases its next Crop Production Report on Oct. 10.  Rain and showers may reduce the dryness in parts of Brazil to about 25% over the next two weeks but Argentina remains too dry. Today’s weekly ethanol report showed inventories rose 719,000 barrels to 23.219 million barrels. Daily production rose 15,000 barrels a day from a 3 1/2-year low set last week. Don’t look for much support in Thursday’s weekly USDA export sales report. Traders surveyed by Reuters forecast new sales of 400,000 to 800,000 metric tons (MT), compared with actual sales of 493,966 in the week ended Sept. 17.

 

Soybeans: Soybean futures faced some pressure today, which resulted in November through May futures settling 1 to 5 ¾ cents lower on the day. Far deferred months closed steady to 1 ½ cents higher. Soymeal finished with losses ranging from $1.40 to $3.80, while soyoil settled with gains around 30 cents. After pushing prices sharply higher the past two days, the market paused and booked some profits at midweek. An elevated U.S. dollar index is encouraging to that end. USDA’s slightly smaller than expected Sept. 1 soybean stocks estimate and a downside revision to the 2018 soybean crop sparked the recent rally. But at 913 million bu., quarterly bean stocks are still up sharply from the previous season’s 438 million bushels. Support has also stemmed from generally positive updates on the U.S./China trade front of late, including some goodwill Chinese purchases of U.S. soybeans leading up to another round of trade talks next week. This morning, USDA announced a 464,000-MT soybean sale to China for 2019-20 via its daily reporting system. Since early September, China has purchased more than 2.1 MMT of U.S. beans, though overall commitments are still far behind the norm.

Wheat:  December soft red winter wheat futures lost 9 3/4 cents at $4.89. December hard red winter wheat closed down 5 3/4 cents at $4.05 3/4. December spring wheat futures closed down 3 ½ cents at $5.29 1/2. Prices closed nearer the session lows and have given back most or all of this week’s gains. Today’s losses now make this week’s highs tough technical resistance to overcome in the near term. There remain adequate world wheat supplies despite dryness in Australia and Argentina and concerns about the quality of the 2019 Canada crop due to recent snows and cold temperatures. Also, U.S. wheat export prices remain at a premium to other origins which tends to offer resistance on rallies. Key could be direction of corn prices and getting more wheat in U.S. feed rations. Egypt today tendered to buy an unspecified amount of wheat from global suppliers with lowest offers from France and Ukraine. Morocco’s state grain agency said it awarded 30,000 MT of reduced-tariff imports of U.S. soft wheat in a tender. Two South Korean flour mills purchased around 77,500 MT of milling wheat today, reportedly from the U.S.

Cotton: December cotton futures prices closed up 35 points at 61.33 cents today. Prices closed near the session high and at the highest closing level in two weeks. Short covering was featured in the cotton futures market today, amid ideas there is not a much downside price pressure left in the market. Cotton traders were impressed that futures prices sustained gains today despite bearish “outside market” forces that included sell offs in Asian, European and U.S. stock markets, as well as lower crude oil prices, which hit a nearly two-month low today. There is talk in the market that recent rains in the southern U.S. and forecasts for warm weather in the near term will help some of the smaller bolls develop and produce more cotton this year--especially in Texas. Cotton traders are awaiting Thursday morning's USDA weekly export sales report, to see if China has stepped up its purchases of U.S. cotton. Commercial buying is slowly increasing, suggesting improved export demand may be developing. However, the market will need fresh evidence of that buying in the weekly export sales report to take out the mid-September highs.

Hogs: Lean hog futures ended mixed today. The October through February contracts finished 27 1/2 to 82 1/2 cents lower. Far-deferred contracts favored a slightly firmer tone. Lean hog futures opened higher this morning, but buyer interest proved to be short-lived in fall- and winter-month contracts due to their sizable premiums to the cash index. While the cash market has firmed over the past week, the tendency is for weaker prices through the fourth quarter as supplies reach seasonal peaks. October hogs are roughly $5 above the cash index and December hogs are another $7 higher. That reflects expectations Chinese demand will strengthen the cash market contra-seasonally through year-end. Much of the market’s attention Thursday should be on weekly export sales data, specifically the tonnage of pork sold to China. Chinese purchases of U.S. pork are up sharply, but traders are waiting on a shockingly big figure, especially after Beijing reportedly pledged to buy up to 100,000 MT of U.S. pork as a goodwill gesture to advance trade talks.

Cattle: Cattle closed higher and near session highs. December cattle rose 80 cents to $110.625 with February rising 75 cents to $116.80. Feeders were up 90 cents to $1.50. December cattle rose to the highest since Aug. 9, erasing an earlier decline and forming a bullish outside-day reversal up. The market was supported by reports of cash cattle trading $1 higher when many were looking for steady-to-lower bids this week. Retailers are featuring pork and chicken this week but the increase in beef demand today suggests a return to more beef features later this month. Midday beef prices were higher on strong morning sales. Choice cutout values rose 6 cents and Select gained 31 cents. Slaughter the first three days of this week is estimated by USDA at 350,000 head, unchanged from a week earlier and down 4,000 head from a year ago. Thursday’s trade will key off the USDA export sales report for the week ended Sept. 26. Any Chinese buying would be a bullish surprise.

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