After the Bell: Grains Lead Higher After USDA Report; Weather is Now the Focus

Posted on 07/11/2019 3:47 PM

CornCorn futures settled high-range with gains of 6 3/4 to 9 1/4 cents in the September through July 2020 contracts. USDA raised its old- and new-crop ending stocks forecasts more than expected in today’s Supply & Demand Report. But the market turned around after the data, signaling traders didn’t believe the World Board’s projections. The stronger-than-expected increase to new-crop ending stocks was driven by a bigger corn crop estimate. Traders feel the crop size will decline and ending stocks will drop once NASS resurveys acreage and starts estimating the crop in August. Today’s high-range close suggests some followthrough buying is likely. How the market closes out the week tomorrow will mean more to near-term price action than today’s reversal. Weather will be critical to near-term price direction. The midday GFS weather model was wetter for areas of the Corn Belt over the next two weeks.  

Soybeans: Prices rose for a fourth session, closing near session highs. November beans were up 4 ½ cents to $9.17 ¼.  Today’s USDA supply and demand was a positive development, with the crop still struggling to catch up after delayed planting. USDA trimmed its old-crop soybean ending stocks estimate 20 million bu. from last month. USDA cut its new-crop soybean carryover projection 250 million bu. from June. The World Board used NASS’s June acreage estimates and trimmed yield by 1 bu. to 48.5 bu. per acre, “based on a weather-adjusted trend model and reflects the impact of delayed planting.” That trimmed the projected crop size by 305 million bu. from last month. Combined with the smaller amount left from the 2018 crop, total supplies are projected down 325 million bu. from June. The only change to the demand side of the new-crop balance sheet was a 75-million-bu. cut to exports, which are now projected at 1.875 billion bushels. USDA raised its cash on-farm new-crop soybean price projection by 15 cents from last month to $8.40. Weather uncertainty offset worries about demand. Today’s weekly export sales showed old-crop sales were 132,200 metric tons (MT) and new-crop sales rose to 129,500 MT, both below most trade estimates. Meal and oil sales were also light.  

Wheat: Winter wheat futures closed up around 15 to 18 cents today and near daily highs. Spring wheat closed about 12 cents higher. The monthly USDA supply and demand report that came out just before midday was deemed friendly for wheat and prompted short covering and new buying in the futures markets. Highlights of the report include all U.S. wheat production at 1.921 billion bushels, whereas traders expected a 1.908 billion-bushel reading. U.S. wheat carryover is forecast at 1.072 billion bushels for the 2018-19 marketing year, down from 1.102 billion in the June USDA report, and at 1.000 billion bushels for 2019-20, down from 1.072 billion bu. in June. World wheat carryover, excluding China, was seen at 135.45 million metric tons (MMT) for the 2018-19 marketing year, down from 136.58 MMT in June; and 140.57 MMT for 2019-20, down from 148.15 MMT in the June USDA report. The lower U.S. and global ending stocks figures are what wheat traders focused on.Wheat traders seemed to overlook this morning’s weekly USDA export sales report, showing weak overseas demand for U.S. wheat. Sales were 284,400 MT, at the low-end of trade estimates calling for 250,000 to 500,000 MT of new business.

 Cotton: Futures closed lower and in the bottom quarter of today’s range, with December falling 74 points to 63.08 cents. Today’s USDA supply and demand report was slightly negative for the trade as the agency increased its old-crop cotton ending stocks forecast by 350,000 bales from last month by cutting exports by 250,000 bales and domestic use by 100,000 bales. USDA increased its new-crop cotton carryover projection by 300,000 bales from last month, mostly from higher carry-in supplies from this year. USDA now projects the cash on-farm new-crop cotton price at 63 cents, down a penny from last month and below the 70 cents projected for this year. New-crop world cotton carryover raised to 47.74 million bushels from 45.76 million estimated in June and up from 43.91 million estimated this year. Today’s weekly export sales report showed a sharp improvement in old-crop sales with exporters reporting 141,500 bales of new business. However, new-crop sales were light at just 55,300 bales.   

Hogs: August lean hogs closed down $2.575 at $78.15, while the October contract lost $1.60. Both closed near their session lows. The hog market bulls quickly saw their balloon deflate today, following two strong up days in a row. Sluggish weekly USDA export sales put pressure on the hog futures market today. USDA said pork sales fell 53% from the four-week average and shipments were down 3%. There were no new Chinese purchases, but China and Mexico were the top destinations for pork last week. Adding to the bearish tone today, fresh pork cutout values fell another $1.68 at midday as slaughter the first three days of this week is up 24,000 head from a week earlier and 76,000 head from a year ago. All cuts but ribs registered declines today, on movement of 184.91 loads.  

Cattle: Live and feeder cattle rebounded from earlier losses to close near session highs. August live cattle gained 25 cents to $107.875 and August feeders rose 27.5 cents to $142.625. Seasonally declining slaughter numbers and falling market weights mean less beef supply amid very good domestic consumer demand. Peak cattle supplies are behind the market and the latest USDA carcass data for June 29 show weights are 11 lbs. below a year ago and the five-year average, and lowest for that week since 2011. Based on placement data, fed cattle supplies may not be much larger than 2018 in the third quarter. USDA trimmed its 2019 production forecasts 175 million lbs. from its June forecast but also cut is export forecast 10 million pounds from both last month and last year’s final total.  USDA’s weekly export sales report this morning showed 21,500 MT of beef sold last week, up 26% from the prior four-week average. Shipments slowed 17% from the four-week average.

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