After the Bell: Corn, Soybeans Jump as Dollar Weakness, Export Sales Trigger Short Covering

Posted on 09/20/2018 2:58 PM

Corn: Corn futures closed up 6 to 6 3/4 cents and in the upper half today’s big-range trade. December futures rose 6 ¾ cents to $3.52 ½. Corn futures are posted strong gains today after bouncing off contract lows set on Tuesday. Wednesday’s small rally triggered additional fund short covering today and probably encouraged end user pricing. This morning’s weekly USDA export sales report showed new sales of 1.384 million metric tons (MT) in week ended Sept. 13. That topped trade estimates and keeps the current sales pace 50% higher than a year ago. USDA’s daily reporting service said private exporters sold 160,020 MT to Mexico for delivery this season. Argentine corn export premiums are rising as exportable supplies are very tight and further constrained by new taxes. Combined with Brazil and Ukraine corn export prices as much as 30 cents a bushel above U.S. offers, U.S. exporters are poised to be the exclusive corn supplier to the world market. Heavy rains have fallen the past three days from South Dakota to Wisconsin, causing isolated flooding in some areas of Iowa. More rain expected early next week before cooler temperatures and drier conditions return. World stocks rose today on relief that this week’s fresh U.S. and Chinese tariffs on reciprocal imports were less harsh than originally planned. The dollar fell against most foreign currencies, adding additional support to the short-covering rally in corn. 

Soybeans: Soybean futures reversed higher during the day trading session and futures settled high-range and up 19 1/2 to 20 1/4 cents. Soymeal and soyoil futures also posted strong gains. Followthrough buying tomorrow would suggest a bottom has been hit, while another move lower would signal today’s move was just short-covering within a bear market. Funds covered short positions today amid talk of some positive trade developments. Export sales for the week ended Sept. 13 topped expectations and included some shipments to Argentina. After producing a short crop, Argentina is in need of beans for crushing, and there has been some talk the country is transshipping the oilseed to China. We have also heard talk that Canadian National/Canadian exporters are lining up cars to ship soybeans from the Dakotas and Minnesota to its west coast for shipment to China. Adding to the positive tone was news Europe has been an aggressive buyer of U.S. soybeans in recent months and a drop in the U.S. dollar index to its lowest level since early July. In addition, heavy rains across some areas of the Midwest this week have also delayed harvest efforts and raised some quality concerns.

Wheat: Winter wheat futures finished slightly higher and near where they opened overnight. Prices gained for a third session and are heading for the first two-week rally since early August.  SRW and HRW futures rose ¾ cent to 2 1/4 cents. Spring wheat closed ½ cent to 1 ¼ cents higher. The wheat futures markets continue to rebound from the eight-week lows last week, helped today by the strong rallies in corn and soybeans and a weaker U.S. dollar that makes U.S. wheat cheaper for overseas buyers. The market has developed a solid basis of support as supplies of milling-quality wheat in exporting nations are going to be tight until next summer’s harvests. USDA said this morning that U.S. exporters sold 468,400 MT last week, up 32% from the prior four-week average and at the top of trade estimates. More importantly, Egypt, the biggest global buyer, bought 475,000 MTs of wheat at an average fob price of $228/MT on Wednesday. This is up $5/MT from its tender last week and compares to $197 in Sept of last year. All but one cargo was sourced from Russia, further reducing the exportable surplus there. Turkey announced a tender for 253,000 MT of milling wheat, which closes next Tuesday. Consumers are beginning to increase forward coverage. Market support also stems from adverse weather in Australia after cold weekend temperatures and a continued dry outlook for another two weeks curb potential output in the fourth-largest exporting nation. Spring wheat harvesting in Russia continues to be delayed by snow and cold weather. Limited rain and warm temperatures will deplete soil moisture for winter grain planting in much of Europe. More rain will be need for crop establishment.

Cotton: Cotton futures lost 11 to 56 points in the nearby contracts and closed near mid-range. Buying interest in cotton remains limited amid ongoing concerns about heightened trade tensions between the U.S. and China. Also, this week’s big downdraft in prices produced near-term technical damage, which has likely emboldened the chart-based speculative sellers. Today’s weekly USDA export sales data for cotton showed net sales of 97,800 running bales in the 2018-19 marketing year, which were up 20% from the previous week but down 24% from the prior four-week average. To spark a sizable price recovery, export demand needs to signal prices have dropped low enough. Today's export data was as of Sept. 13 – before the sharp price break earlier this week and when prices were still in the sideways trading range.

Hogs: Lean hog futures finished the day widely mixed. The October and December contracts ended $1.25 and 37 1/2 cents higher, respectively, while other contracts were slightly lower. October and December hogs continue to be supported by strength in the cash and product markets. The average cash hog bid firmed another $1.16 this morning, while the pork cutout value was 55 cents higher. As long as cash market fundamentals continue to strengthen, nearby futures will have additional upside potential, despite their premiums to the cash market. Deferred lean hog futures faced light profit-taking today. While traders anticipate the African swine fever outbreak in China will eventually fuel additional export demand for U.S. pork, they are uncertain when the increased demand will kick in. Therefore, they are hesitant to build too much premium into 2019 contracts at this time. Pork export sales in week ended Sept. 13 rose 22% from a week earlier, but were down 2% from the four-week average at 22,900 MT.

Cattle: Live cattle futures finished mixed--up 17.5 cents to down 35 cents—but did hit a 6.5-month high today in the December contract. Feeder futures were down 12.5 cents in the November contract and up 7 1/2 cents in the January contract. Buying interest in cattle futures was limited by weekly U.S. beef export sales that rose to 15,900 MT last week but came in 16% below the prior four-week average. USDA also announced sales of 300 MT for 2019. USDA reported light cash trade in the Iowa/southern Minnesota market at $110 on Wednesday. Wednesday’s Fed Cattle Exchange online auction reported of 528 head offered but none sold, indicating sellers are willing to hold out for higher bids. Choice and Select boxed beef values gained $0.76 and $1.29, respectively, at midday on light movement of 72 loads. Traders are awaiting Friday afternoon’s USDA Cattle on Feed Report. Traders expect On Feed numbers to rise 5.4% from year-ago to a record for Sept. 1. Placements are expected to be up 4.4%.

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