After the Bell: Grains, Soy Rebound to Close Higher on Wet U.S. Weather, Next Week's Trade Talks

Posted on 03/21/2019 3:03 PM

Corn: Nearby Corn futures closed up 2 1/4 to 4 cents, hit three-week highs and finished nearer their daily highs. Short covering was featured today, and follow-through buying interest and a bullish weekly high close on Friday would better suggest the corn futures market has bottomed out. A Bloomberg News report today said China could begin purchasing U.S. corn and other feed grains as soon as the beginning of April. Snow pack in the upper Midwest and Northern Plains is equal to 5 to 10 inches of water. As this snow melts it will flow into major river basins and could possibly add to areas that are already dealing with historic flooding. While real concerns about significant planting delays are at least a month away, devastating flooding and wet forecasts into April have limited new selling interest in the corn market. The Corn Belt is set for the wettest September-to-March period in 125 years of data, according to T-storm Weather. More than 240 river gauges are in minor to major flood stages from North Dakota to New Orleans. USDA’s weekly export sales report showed new sales of 855,900 MT of corn in the week ended March 14. That was in the middle of the 600,000 MT to 1.0 million MT expected. Another Chinese purchase of 65,000 MT of sorghum will keep the market supported and hopeful for new China buying of corn once a trade deal is signed.

Soybeans: Soybean futures saw some pressure early in today’s session, but the market ultimately settled high-range and up roughly 4 cents. Soymeal futures notched strong gains of $3.60 to $3.70, while soyoil futures dipped 17 to 18 points. Soybean futures were initially pressured by comments from President Donald Trump that he planned on leaving tariffs on Chinese goods in place for some time to ensure China follows through on any trade deal commitments. But ideas the president may simply be “talking tough” ahead of next week’s talks between key U.S. and Chinese trade officials tempered some of that pressure. The market also absorbed a disappointing showing in the weekly export sales report quite well, with old-crop sales of 399,500 MT for 2018-19 falling well short of expectations and USDA reporting a net sales reduction of 64,400 MT for 2019-20. Updated maps from the National Weather Service out today favor above-normal precip across the Midwest and Plains, along with cool temperatures in the western Belt. Planting is off to a slow start for southern growers, and a wet April forecast signals more delays are likely.  

Wheat: Winter wheat futures were steady to up 2 1/2 cents, hit three-week highs and finished nearer session highs. Spring wheat futures ended down ¼ cent to up 2 ¼ cents. Tepid short covering was featured today, but follow-through buying and bullish weekly high closes on Friday would help to confirm that the wheat futures markets have put in bottoms. Still, demand for U.S. supplies continues to be lackluster. USDA weekly export sales this morning showed exporters sold 298,600 MT last week for delivery before June 1. New-crop sales were also disappointing at 138,800. Grain markets have absorbed selling well this week. However, the speculative funds are holding excessively large net-short positions heading into the Northern Hemisphere’s growing season. That’s actually a bullish element for down the road.

Cotton: Cotton futures closed sharply higher, with May up 168 points to 77.18 cents and December rising 34 points to 75.33 cents. Cotton prices broke out to new highs, triggering fresh fund short covering. The weekly export sales report was slightly positive, with new sales of 125,000 running bales sold last week, including 84,700 RB purchased by China. Chinese mills were also buying new-crop cotton, taking 15,400 RB of the 32,800 RB sold last week. Exports shipments improved last week and that may be more important because of the recent sluggish activity. Shipments last week for 350,100 RB, primarily to Pakistan, Vietnam and Indonesia, but China also shipped 36,200 bales. The market also gained support from a strong stock market today. The market shrugged off the Federal Reserve warning of an economic slowdown as U.S. unemployment claims fell more than expected and a factory orders report showed a sharp rebound in manufacturing activity.

Hogs: Gap and go! After closing limit up on Wednesday, the hog futures gapped higher and closed up the expanded limit today. April hogs rose $4.50 to $78.325 and June jumped the $4.50 limit to $86.65. The lean hog futures market soared today on confirmation of new Chinese buying of U.S. pork amid indications that Chinese pork production may fall more than 20% because of African swine fever (ASF). Our sources indicate that China’s market hog supply is down anywhere from 15% to 70%, depending on the province. Hebei, a province in northern China that includes Beijing, is one of the worst areas, where losses are likely in the 70% area. Nationwide, industry sources signal a ballpark number is that the Chinese hog herd is down 30% to 40% based on feed use.Even with hefty tariffs on U.S. shipments in place, China bought more pork last week. This morning’s weekly export sales showed 29,300 MT sold last week, including 3,000 MT to China. Mexico boosted its purchases by 15,5000 MT. China also shipped 4,600 MT last week. While grain traders remain skeptical of a trade deal, livestock traders are certain that China will be a significant buyer of U.S. pork in the months ahead.

Cattle:  April cattle futures rose 62 1/2 cents to $130.20, while June hit a new contract high today and gained 80 cents to $124.175. May feeder cattle were up $2.075 and scored a 5.5-month high. There are several fundamental elements at work supporting the rally in the cattle markets recently, including the strong U.S. economy and rallying stock market, which are keeping consumers confident and buying steaks .Recent flooding and upcoming snow melt in the Midwest are expected to continue to cause problems for some cattle feedlots, keeping a firm bid in feeder cattle until losses are better defined. U.S. beef sold for export in the week ended March 14 rose to 18,625 MT, up from 12,811 MT a week earlier. Hong Kong was the biggest buyer last week.  Wholesale beef gained a bit today, with Choice up 18 cents and Select gaining 54 cents. Sales were 53 loads. So far this week, there have been some light cash cattle sales in the Corn Belt between $126 and $130, with the bulk of action being near the $130 mark. Most expect steady or better trade versus last week’s $127 action.

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