After the Bell: Grains Rally Amid Weather Concerns; Livestock Lean Lower

Posted on 06/24/2019 2:55 PM

Corn: Corn futures prices today closed nearer their session highs, up 3 3/4 to 4 3/4 cents in the nearby contracts. Don’t be surprised if the corn market goes into a pause mode until the all-important USDA reports on Friday morning.  The agency will update U.S. planted acreage and estimated June 1 inventories. The average estimate of traders surveyed by Bloomberg showed corn planting would fall to 87.03 million acres, down from 92.79 estimated by USDA in March. Our estimate is 88 million. June 1 corn inventories are expected to come in at 5.335 billion bu., up from 5.305 billion bu. a year earlier, according to the average of analyst estimates. We forecast the stocks at 5.275 billion bushels. Midwest weather turns warmer and drier starting Tuesday and for the next 10 days, before a wetter, cooler period begins again. Corn futures will keep a risk premium for any additional challenge to yields. In the absence of hard, reliable numbers on planted area and yield potential, the firming corn and soybean basis last week were the best signals that commercials are very concerned about final supplies. This morning’s weekly USDA export inspections report showed 617,740 metric tons (MT) of corn inspected and shipped overseas in the week ended June 20, down from 678,024 MT a week earlier and less than half the 1.54 million MT a year ago.

Soybeans: Soybean futures got off to a softer start, but the market quickly uncovered buying interest when the front-month tested support at $9.00. Futures settled high-range and up roughly 5 to 6 cents. Soymeal futures posted gains largely falling between $1.70 and $2.00 and soyoil futures posted gains around 10 points.  A wetter than anticipated weekend to cap off a wet, cool workweek lifted the bean market today. The rain and recent cool temps slowed the dry-down of soils and planting efforts, as has been the story so far this growing season. Traders expect USDA to report 88% of the U.S. soybean crop had been planted as of Sunday, but it’s unclear just how much of that was advanced via planters and how much via prevent plant decisions. The weather is expected to be warmer and drier the latter half of this week, but the calendar flip to July is upon us.  Dollar weakness and gains in the corn, wheat and crude oil futures markets added to the positive tone today. Meanwhile, U.S. soybean export inspections of 682,155 MT the week ending June 20 were in line with expectations. But overall commitments for 2018-19 still lag year-ago levels by 25.5%.  

Wheat: Wheat futures closed high-range. Winter wheat futures finished mostly 11 to 13 cents higher, while spring wheat futures generally ended around 9 to 10 cents higher. Weather and crop concerns were the price catalysts in the wheat market to open the week. More heavy rains across the central U.S. caused additional concerns with crop quality and yields. In addition, there are dryness concerns in parts of the Black Sea region and a heat wave is stressing crops in western Europe. Beneficial rains in the U.S. Northern Plains and Canadian Prairies somewhat limited gains in the spring wheat market for much of the day, though that market finished strong.  Weekly wheat export inspections totaled 406,386 MT, which was right in the middle of the range of pre-report expectations. Wheat inspection are running 5.8% ahead of last year’s sluggish pace three weeks into the 2019-20 marketing year. The upswing in prices since May has been somewhat offset by a falling U.S. dollar, but U.S. wheat prices are still not very competitive on the global market.  

Cotton:  Futures ended slightly higher but in the bottom half of the daily range. December futures were up 13 points at 65.69. It was a choppy price session with prices ending slightly above the opening range but with little enthusiasm. The weekly CFTC report showed funds raised net-short positions to 30,385 futures and options as of June 18, up fractionally from 30,241 contracts a week earlier and below the 37,086 contracts four week earlier. Producers their cut net-short position to 28,871 contracts from 31,076 futures and options a week earlier. It appears that selling and hedging interest is drying up. The market will be looking for anything positive from the meetings between Presidents Trump and Xi late this week in Japan at the G20 meetings. Not much is expected with the Trump Administration looking to require next generation 5G cellular equipment used in the United States to be designed and manufactured outside China. The Chinese government in an editorial in their state-run “People’s Daily” indicated that China has the strength and patience to fight the U.S. trade war to the end. China is demanding that the US drop all tariffs imposed on China if it wants to start new talks.  

Hogs: Prices closed sharply lower and near session lows. August hogs dropped $3.675 to $74.225 with December declining $3.475 to $68.90.  Today was all about funds dumping remaining longs amid negative chart momentum as cash fundamentals stabilized a bit. Fresh pork and cash hogs tumbled last week as slaughter rose to 2.449 million head last week, up 18,000 from a week earlier and 285,000 above a year ago. Slaughter slowed to 448,000 head, down from 467,000 head last week but still up 14,000 head from a year ago. Fresh pork cutout values inched up 73 cents today led by gains in bellies and ribs. But sales continued to underwhelm.  Some of the selling may be tied to anticipation of a bearish USDA Hogs and Pigs Report on Thursday after the slaughter the past two months topped data released at the end of March. It looks like the surge in prices tied to forecasts for record Chinese buying and shipping of U.S. pork led to growers filling every house last fall with market pigs.  

Cattle: Live cattle futures prices closed up 20 cents in the August after hitting a contract low, while October live cattle lost 12.5 cents. August feeder cattle futures careened to another contract low and closed down $1.90 today. The downward trajectory in the cash cattle market continues to spill over into selling in the futures. While cattle marketings and feedlots remain current, the slide in the cash market continues, despite many market watchers thinking a seasonal bottom in the cash market is close at hand. Last Friday afternoon USDA reported cattle feeders placed 2.8% less cattle on feed in May than a year ago, which was still a smaller decline than most expected. The total number of cattle on feed on June 1 rose 1.6% from a year ago, which was about as expected. Today’s Choice cutout rose $0.27 per cwt from Friday, while Select rose $0.79. Movement was light at 50 loads.

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