After the Bell: Corn, Wheat Lead Rally on Wet U.S. Weather Raising Crop Risks

Posted on 05/16/2019 2:37 PM

Corn:  Corn futures closed up 8 1/4 to 10 1/4 cents today, near their new six-week highs. Bulls hit the accelerator today amid a serious weather market to start the growing season. Corn Belt weather forecasts look wet starting today through next week. The heaviest rains will be focused from south Texas to central Minnesota with totals expected to reach 2 to 5 inches. Much of the eastern Midwest will still get ¼ to 1 ½ inches of rain.There are notions the persistent rains will curb the size of U.S. corn planted acreage, while late seeding increases risk for lower yield potential. With world demand rising, a drop in U.S. production leads to a tighter global supply story.

Soybeans: Soybean futures prices closed up around a nickel today and near mid-range. Meal futures finished up around $2.50 and bean oil was up 44 points in the July contract. The soybean market is seeing spillover buying interest due to solid gains in the corn and wheat markets late this week. Also, much of the buying in beans is short-covering from funds that were short a record number of futures and options contracts as of May 7. Wet Midwest weather forecasts remain a supportive feature with just 9% of the soybean crop planted as of last Sunday--20 percentage points below the five-year average. Yields start to fall on fields planted after May 20.Rallies have been limited by reports of active Chinese buying of Brazilian soybeans for summer delivery in the past week. That has boosted Brazilian export prices far above U.S. values, leaving the U.S. as the cheapest supplier to any countries outside of China.

Wheat:  Wheat futures rebounded from overnight losses and closed sharply higher. July SRW futures rose 18 ¼ cents to close at $4.67, while July HRW futures gained 16 ¾ to close at $4.18 ¾.  September spring wheat rose 11 ¼ cents to $5.35 ¾.  Prices rose on renewed fund short covering as ongoing excessively wet weather has raised concerns of increased disease in winter wheat and planting problems for spring wheat with rain now forecast to last into June. Weekly USDA export sales for last week showed net sales of 114,500 MT for old-crop and 419,400 MT for new crop. Both were up slightly from a week earlier and lent some underlying support. Yesterday, Australia said it will import its first shipment of wheat in 12 years as a drought across the country's east coast wilts supply in the world's fourth-largest exporting nation.

Cotton: July cotton futures finished 45 points higher today, while the December contract gained 20 points. Cotton futures mildly favored the upside through the day on support from solid weekly export sales. USDA reported old-crop sales of 226,900 running bales and new-crop sales of 176,400 bales. The pick-up in export sales activity suggests foreign buyers responded to the sharp drop in price. There were also good shipments of 385,700 bales for the week. Export commitments are running above USDA’s forecast. However, there are 736,200 bales of unshipped old-crop cotton sales to China on the books. And there are questions about how much U.S. cotton China will take from now until the end of the marketing if a trade deal isn’t completed. Traders are also keeping a close watch on the weather.  

Hogs: Lean hog futures rallied late to finish 40 to 97 1/2 cents higher and near session highs. The market bounced back from a lower start that was tied to this morning’s disappointing export sales report. While the U.S. shipped 4,600 MT of pork to China in the week ended May 9, net sales were only 10,500 MT, which was down 52% from the four-week average and there were net sales reductions of 3,200 MT to China. Given the importance of Chinese demand to the outlook for the hog market, bulls should be encouraged by today’s price performance. While there is risk of China cancelling more U.S. pork purchases if a trade deal doesn’t get done, Chinese buyers are going to need pork.

Cattle: June live cattle futures hit a nine-month low early today but then rallied to close up $1.15, while the August contract gained $1.15. August feeder cattle rose $1.175 after hitting a contract low earlier today. Short covering and perceived bargain hunting were featured in the cattle futures markets today. Cattle are due for a seasonal low and the market is technically oversold. Prices started lower on reports of cash trading down another $2 to $3 on Wednesday. However, trade volume was light and suggests feedyards passed on the lower cash bids. Boxed beef prices were slightly lower again at midday, with Choice down 9 cents and Select down 3 cents. Sales were a solid 103 loads. Beef export sales last week fell 22% below the prior 4-week average while shipments were up 16% from the average, USDA reported this morning.

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