After the Bell: Grains Firm On Excessive Rains as Soybeans Drop on Slow Demand

Posted on 05/02/2019 2:37 PM


Corn: Corn futures ended up 3/4 to 2 cents today, closed near their daily highs and hit two-week highs Wet, cold U.S. weather that is and will slow planting progress has supported the corn market late this week. With almost daily showers and cool temperatures expected the next two weeks, corn planting progress will remain slow. That can lead to reduced planted acres and reduced yield potential. Traders are focused on the increasing potential farmers will take the prevented-planted crop insurance option without both better prices and drier weather the next three weeks. Also supportive for corn today is apparent progress during U.S.-China trade talks this week, which should keep a firm undertone to the market. Reports said both sides could reach an agreement by late next week. Short covering by speculative fund traders has also likely contributed to this week’s gains in corn. Weekly USDA export sales data today was negative for corn. Old-crop corn sales totaled 586,500 MT, down 25% from last week and 17% below the four-week average; new-crop sales totaled 209,500 MT.

Soybeans: Soybean futures slumped to new contract lows for a fourth straight session. July beans were down 8 ½ cents at $8.43 ¼. Soymeal fell $3-plus and beanoil was 15 to 24 points lower. Soybeans opened steady to higher and fell to new lows for a fourth straight session. A weak export sales report, big South American crops and cheaper prices along with concerns about Chinese demand continued to hang over the soy market. The dollar was stronger today and oil prices slumped more than 3% to keep funds looking to add to record short positions. According to USDA's weekly export sales report released on Thursday, private traders sold 336,900 metric tons (MT) of soybeans during the week ending April 25, which was far below analysts' forecasts and the prior week's total of 618,998 MT. China was credited for 136,400 MT, but 133,000 was switched from prior sales made to unknown destinations. Soymeal sales were 67% below the prior four-week average. But export commitments for the date are record high. Several reports in the local press said that Argentina is considering increasing export duties given the strong depreciation of the local currency against the dollar, which has fallen by 50% in the last year. That could aid U.S. soybean meal and oil exports. The U.S. soybean crush in March was pegged at 179.4 million bu., down from 182 million a year ago and slightly below the 179.9 million expected by traders polled by Reuters. Soybean oil inventories at the end of March rose to 2.233 billion lbs., up from 2.149 billion a month earlier and the fourth straight monthly gain.  

Wheat: After trudging lower the past few weeks, wheat futures enjoyed some welcome short-covering today. SRW futures were the leader, with the front-month leaving an opening gap to the upside on the chart. That market settled 7 ½ to 8 ½ cents higher for the day. HRW wheat notched gains mostly in the 5- to 6-cent range. And HRS wheat futures settled 6 ¾ to 10 ¼ higher. Some possible weather threats led to short-covering in the wheat complex today. Scouts on the Wheat Quality Council’s winter wheat tour measured yield potential well above the five-year average, but they also noted that lagging development ups the odds grain fill will occur during high-temperature periods. See “Evening Report” for more details.  Meanwhile, several rounds of storms have resulted in some flooding in SRW wheat producing areas where the condition of the crop was already sub-par.  Soggy weather has also been problematic for the spring wheat crop, as wet soils and cool temperatures have planting progress running well behind the normal pace for this point in the season. That has some calling for more prevent plant acres or possibly a shift to other crops.  

Cotton: Cotton futures were down sharply today and hit six-week lows. July cotton was down 129 points and the December contract dropped 112 points. Prices finished the day near their daily lows. Strong selling pressure in the cotton market today was due in part to bearish “outside market” forces that included a big drop in crude oil prices, a sell-off in the U.S. stock market and a firmer U.S. dollar index. Today’s USDA report showed all cotton sales were 157,700 running bales (RB). Seasonally, those sales are near normal. Old-crop cotton sales typically slow down over the next three months. Buyer commitments are in place to assume the normal seasonal sales pace for upcoming weeks. However, cotton shipments are running too low. They totaled only 302,900 RB this week. With 14 weeks left to ship in the crop year, the weekly pace needed to reach the USDA forecast is 403,800 running bales. This is the third consecutive week that shipments have been well below what is needed.  The U.S. and China are nearing a trade deal that would roll back a portion of the $250 billion in U.S. tariffs on Chinese goods, Politico reported. The talks are to resume next week in Washington, where some observers say a deal announcement is possible.   

Hogs: Futures ended mixed but down from early-session highs after jumping the exchange maximum yesterday. June hogs closed $1.525 higher to $92.75, with October down $1.125 at $87.625. Prices have found support this week from expectations for increased Chinese pork buying into 2020. The wholesale pork cutout value jumped $1.51 at midday on strength in loins and ribs. However, sales were sluggish. Cash hogs will need to lead the rally with futures well above current bids. Gains were capped or reversed after a disappointing weekly USDA export sale report this morning. The government reported 16,100 MT of pork sold last week. While up 4% from a week earlier, it was down 59% from the prior four-week average. There were no new Chinese purchases last week. China did ship in 4,400 MT, pushing total weekly shipments 2% above the four-week average.  U.S. business may improve with a successful conclusion to U.S./China trade talks and reduced competition from Canada.  

Cattle: Live and feeder cattle futures finished low-range today. Feeder cattle led losses, dropping $1.325 to $2.40 through the November contract. Live cattle fell 20 cents to $1.10 through the December contract, with the back months leading losses. Cattle futures extended their recent, sharp price decline as funds continued to liquidate long positions. As of April 23, funds were long just over 155,000 contracts of live cattle. Since then, the front-month June contract has plunged $7.50, as funds have greatly reduced their market length. Until the fund selling subsides, there’s more near-term downside risk. Feeder cattle have faced even more pressure during the selloff. May feeders have plunged $10.655 since April 23. A sharp drop in cash feeder cattle prices is the fundamental pressure behind the sharp decline. Technical momentum is clearly in bears’ favor, with today’s plunge resulting in new contract lows in May feeders. Deferred months are still above their contract highs. But short-term momentum indicators signal the market is oversold and due for at least a pause. Plus, May feeders are now roughly $5 below the cash index.  

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