After the Bell: Drier Weather Powers Up Midwest Planters to Push Grain, Soy to New Lows

Posted on 04/22/2019 2:48 PM

CornFutures pushed into new lows today with May down 3 ¾ to close at $3.54 ¾ and December falling 3 ¾ to $3.82 ½.  Funds continue to aggressively sell today despite already holding a record net-short. Slightly drier forecasts, albeit not completely dry, encouraged new fund selling in futures. But rains the next two days, during the weekend and two more storms next week will keep planting activities somewhat limited in areas that get heavier amounts. Traders will be looking for planting progress near 5% to 8% completed in this afternoon’s weekly USDA Crop Progress Report for the week ended April 21. Average for the date is about 12% done. Harvesting of a big corn crop in Argentina will continue with farmers likely to be active sellers, increasing competition for U.S. supplies on the world markets. Rains continue to aid the Brazilian second-season crop.The weekly CFTC report showed funds increased their record net-short position by a larger-than-expected 35,783 futures and option contracts to 307,529 contracts in the week ended April 16. Commercials expanded their first ever net-long position 25,573 futures and options to 28,009 contracts. This trade setup remains the potential fuel for a major rally in response to a U.S./China trade deal. Stronger crude oil prices today that may aid ethanol demand, a weaker U.S. dollar and strong weekly export shipments failed to lift prices today.  Corn inspected for export in the week ended April 18 rose to 1.353 million metric tons (MMT) from 1.184 MMT a week earlier. Shipments topped trade estimates.

SoybeansSoybean futures finished mostly 3 1/2 to 4 cents lower, which was near session lows. Soymeal futures finished 70 cents to $1.10 lower, while soyoil dropped 8 to 11 points. Soybean futures were pressured by technical-based selling and spillover from losses in the wheat and corn markets. The soyoil market firmed midday on support from strong gains in the crude oil market, which firmed to its highest level since late October. That temporarily pulled soybeans off their lows, but sellers persisted into the close. The low-range close leaves the market vulnerable to followthrough selling, especially if corn and wheat extend today’s losses overnight. But limited selling overnight could set up a corrective rebound tomorrow. Funds extended their short stance to the biggest on record for mid-April, according to CFTC data. They continue to pump money into the short side of the market given a lack of fundamental or technical reason to cover shorts. Until that changes, there’s more near-term downside price risk. Weekly soybean export inspections were disappointing at 382,298 MT. The soybean export pace is slower than what’s needed to hit USDA’s current forecast. As a result, we plan on lowering our export outlook to 25 million bu. less than USDA’s for 2018-19.  

Wheat: Winter wheat futures closed mostly down around 8 cents today, with HRW prices slightly 7 to 8 cents and setting new contract lows. Spring wheat futures closed 8 ¾ to 14 cents lower. The worldwide supply and demand fundamentals continue to work squarely against the wheat market bulls. There are forecasts for rains to begin next week in the drier parts Eastern Europe and the Black Sea wheat regions. Russian wheat prices weakened $3 to $4 per MT last week, with new-crop prices well below current values. French consultancy Agritel said last Friday it expects Russia's 2019 wheat harvest to reach 78.8 MMT, up from 72.1 MMT last year and 75 MMT forecast before winter. The southern U.S. Plains will see rains this week and next, benefiting the wheat crop as it moves toward reproduction. Central Texas to Kansas will see 1 to 3 inches of rain during the next two weeks. Two-thirds coverage is forecast, with heavier amounts south and lesser amounts into Kansas.

One positive note, U.S. wheat inspected for export rose to 811,130 MT, from 528,714 MT a week earlier. That was above trade estimates for 350,000 to 600,000 MT, with Egypt the top destination, shipping 114,994 MT last week. But that had little or no positive impact on futures. Also, managed funds raised their net-short HRW wheat positions 6,502 contracts to a record 54,295 futures and options in the week ended April 16. Funds were net short 63,076 contracts in the SRW market. These speculative funds are going to have to offset their long futures positions at some point.

CottonFutures ended mixed, with weakness in nearby May contract and slightly stronger in deferred futures. May closed down12 points at 77.19 cents and December rose 17 points to 77.22. Export sales and shipments continue their recent strength and the demand for U.S. fiber remains active around the globe. The MidSouth and Southeast plantings are a bit delayed due to wet fields.  Nothing fresh on the U.S./China trade talks this week probably encouraged some light selling today in the May futures. However, the initial euphoria of an official announcement will allow for one or two days of friendly trading and that may be the next selling opportunity.  The weekly CFTC reports showed funds cut bullish bets to 11,467 futures and options contracts as of April 11, down from a four-month high of 14,652 contracts a week earlier. Commercials increased net-short positions to 99,185 contracts last week, the largest since mid-December.

HogsLean hog futures got off to a higher start, but the market quickly turned lower and settled anywhere from 50 cents to $2.975 lower for the day, with summer contracts leading losses. Traders engaged in some profit-taking to start the week as futures are still at a wide premium to the lean hog index. But the index continues to climb and a strong export story should keep cash prices pointed higher. Already, the spread of African swine fever across China has led to some big U.S. pork buys and the situation is likely to get a lot worse the second half of the year. Today’s Cold Storage Report data for March should also be a reminder of strong demand.  Today’s kill was down 106,000 head from week-ago and 138,000 from year-ago levels due to downtime for Easter. But packers will likely make up for the downtime later this week.  Cash hog bids strengthened notably on Friday, but they were mixed this morning.  

Cattle: June live cattle futures closed down $1.075 today, while the August contract fell 95 cents. Both contracts finished near mid-range on the day. Feeder cattle futures were down 80 cents in the May and lost 97 1/2 cents in the August contract. The cattle markets felt selling pressure to start the trading week following last Thursday’s USDA Cattle on Feed Report that showed all categories on the bearish side of market expectations, including record April 1 cattle on feed. The latest CFTC Commitments of Traders data from last Friday can’t be read as bullish, as speculative funds increased their net longs 3,693 futures and options contracts to a record 152,634 contracts, while commercials increased net shorts to a record hedge of 233,128 contracts in the week ended April 16. Still, cash market fundamentals in cattle remain overall bullish. Choice beef prices rose 98 cents today to $233.62, the highest since June 2017. Select gained $1.46 to $221.95 today. Packer beef margins for last week were a positive $146.04 per head, versus $123.95 the week before, according to HedgersEdge.com.

 

Add new comment