After the Bell: Corn, Soybeans Fall This Week on Fund Selling, Option Expiration and South American Rains

Posted on 11/22/2019 2:26 PM

CornDecember corn futures finished 1/4 cent higher, while deferred contracts were fractionally to a penny-plus higher. For the week, December corn futures dropped 2 1/2 cents. Corn futures tried to stabilize late this week. But without some bullish demand news, buyer interest is likely to remain limited. There were three daily corn sales to unknown destinations this week. While that shows prices have dropped to a level to attract some global end-user buying, it’s going to take more demand to spur buying in futures.  The very poor start to the year in corn exports is keeping funds comfortable with sizable short positions. Until export demand improves enough to make funds nervous about the short side of the market, the upside will remain limited. There’s a chance funds will cover some of their shorts into the end of the year, but late-year window-dressing rarely leads to substantial gains on its own. ny significant South American weather threat would likely result in traders building some premium into the market. But expectations U.S. corn acres will increase will cap the upside on any rally.  

Soybeans: Soybean futures leaked lower setting new eight-week lows near the close. January beans were down 4 cents Friday to close at $8.97, losing 21 ¼ cents this week. January soybean meal futures fell $8 this week to $301.20 and January soyoil futures gained 46 points this week to close at 31.06 cents Focus next week will be on the latest trade talk headlines, awaiting word whether U.S. deputy negotiators will be heading to Beijing next week to meet with the ChineseChina wants to reach an interim trade deal, but it will not shy away from retaliation if necessary, President Xi Jinping said on Friday. It was the Chinese leader's first public comment on the prospects of an interim – or phase one – deal between the two sides. "When necessary we will fight back, but we have been working actively to try not to have a trade war. We did not initiate this trade war, and this is not something we want," Xi said Friday. Speculation has been mounting that the process of ironing out the details of an interim agreement have proved slower than expected as Beijing and Washington struggle to agree on how to roll back tariffs on each other's goods. U.S. President Donald Trump said on Friday that a trade deal with China is "potentially very close" and that he stands with both the people of Hong Kong and Chinese President Xi Jinping amid massive protests in Hong Kong. Trump, speaking on Fox News, said he had made it clear to Xi that "this can't be an even deal" because of China's trade surplus with the United States. South American weather forecasts are favorable with 2 to 4 inches of rain and seasonal temperatures into December 5th. Crops there are off to a good start with remaining dry pockets in northeast Brazil and southwest Argentina. Traders will be watching for a change in the pattern starting in mid-December because of the rising Pacific Ocean temperatures off the west coast of South America.

WheatWinter wheat futures extended weekly gains while spring wheat closed near weekly lows. December SRW futures rose 6 ¼ cents on Friday to close at $5.15 ¼ and up 12 ½ this week. December HRW futures gained 3 cents to close at $4.24 on Friday and up 7 cents this week. December spring wheat fell more than 10 cents this week to $4.92 ¾. Declining U.S. wheat conditions will have traders watching for beneficial rains and warmer temperatures to improve the start to this year’s crops.  Rains are forecast across portions of the Black Sea region next week and if they verify will be a positive boost to the start of this season’s crops.  Global buyers have stepped up purchases recently and more sales will be needed to sustain the rally in world prices and support for the U.S. markets. Too much rain is becoming a problem in parts of northern Europe and drier weather is needed to finish planting.  Market volatility moved higher this week on the rally, a bullish seasonal. December historically sees firmer wheat prices. Keep an eye on the inter-market and intra-market spreads for indications of fund flows coming back into the wheat futures.

Cotton: December cotton rose 158 points to 63.42 cents today after hitting a six-week low on Thursday. March futures rose 84 points to 64.85 cents. For the week, however, March cotton lost 184 points. Short covering in the cotton futures market was featured today after the solid selling pressure seen Wednesday and Thursday, which did produce some near-term technical damage. The onus is still on the bulls early next week to show some follow-through strength after Friday’s good gains. Optimism on the U.S.-China trade front returned late this week and prices pared weekly losses as China invited U.S. negotiators to Beijing and President Trump on Friday sounded upbeat on a Phase 1 trade agreement being reached soon. Also a positive for next week is that weekly U.S. export sales remained active this week, and slower harvest progress raised yield risk premiums.

Hogs: December lean hogs closed up $0.575 at $61.225. February hogs gained $0.20 at $67.65. For the week February hogs lost a hefty $4.35. The lean hog futures bulls’ mission next week is to stop the bleeding after prices fell to a 2.5-month low this week. Helping the hog market bulls out to start next week is today’s big pork cutout value rebound--jumping $3.51 after falling $5.11 on Thursday. Bellies and loins led gains today. Signs of progress toward on a U.S.-China trade deal will also support the hog futures market early next week. In his first comments on a partial trade deal with the U.S., China’s President Xi Jinping said Beijing wants to work toward a phase-one agreement on the “basis of mutual respect and equality.” Xi added that though his nation neither initiated nor coveted a trade war, China would fight back when necessary. This morning, President Donald Trump said there is a “very good chance” to make a deal with China. But hog traders still want to see a signed deal. Big hog slaughter levels remain a market worry, but seasonal tendencies do suggest cash market strength into the end of the year, as hams and picnics rallied to five-year highs.

Cattle: Feeder cattle led the live cattle market lower today, posting losses of $2.75 to $3.325 for the day. Live cattle settled 65 cents to $1.925 lower, with deferred months leading losses. Both markets settled lower for the week, with February live cattle sliding $1.125.  USDA reported frozen beef stocks edged down from the end of September to the close of October, whereas stocks typically rise over that period, reminding of strong demand for beef both at home and abroad. Meanwhile, USDA’s Cattle on Feed Report showed the number of cattle on feed as of Nov. 1 up 1.2% from year-ago levels, which was right in line with expectations. Placements climbed roughly 10% last month, which was just a bit lower than expected. The neutral to friendly data could encourage some corrective buying early next week, with trading volume sliding as the week progresses.  

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