After the Bell: Grains, Soy Slump on Reduced China Trade Optimism, Brazil Rains

Posted on 11/11/2019 2:20 PM

Corn: Corn futures were under pressure the entire day and finished low-range with losses of 3 1/2 to 4 3/4 cents through the September 2020 contract. Corn futures were dragged lower by heavy pressure in the soybean market today. In addition, improved weather in Brazil and Argentina weighed on the market. Traders also remain concerned about a lack of demand, especially export demand. Another reminder of the poor export pace will come tomorrow when USDA releases weekly export inspections figures, which are delayed one day due to the Veterans’ Day holiday. Pre-report expectations will be minimal and the current pace is dismal, so even if the figure comes in above the range of estimates, there’s little chance it will entice a friendly reaction. Given paltry export demand, funds remain comfortable adding to their net short stance in the corn market. Corn needs help from the soybean market to push higher.  

Soybeans:  Soybeans and products closed near session lows. November beans fell 14 cents to close at $9.17. January meal declined $4.30 to $382.70 and January bean oil fell 9 points to 31.62 cents. Soybean weakness accelerated today on waning optimism a trade deal gets signed by December, much less even completed. U.S. President Donald Trump over the weekend said China wants a deal “much more than I do,” in advance of a speech he’ll give Tuesday on trade at the Economics Club of New York, which traders will be watching for more clues. Prices also continued Friday’s retreat when USDA did not make any cuts to the size of the U.S. crop but did cut usage and raised its carryover forecast, encouraging fresh fund selling today. The CFTC Commitment of Traders report on Friday showed funds sold more soybeans than expected but commercials and index funds were larger buyers last week. Funds sold 13,896 contracts to cut their long position to 58,429 futures and options, the first reduction in eight weeks.Weather is neutral to bearish. U.S. harvest continues to bog down this week with snow and rain moving through the belt today and more forecasts for later this week. Brazil’s bottom line is mostly good, but the light and more sporadic nature of the daily rainfall will remain a concern.  

Wheat:  Winter wheat futures closed mixed with December SRW falling 4 ½ cents to $5.05 ¾ while December HRW was up 1 ¼ cents to $4.22 ¾. Spring wheat futures were down about 3 ½ cents. The wheat market largely followed corn lower today, with weakness in European and Russian wheat prices adding to the negative trend. On Friday, USDA trimmed this year’s U.S. crop by 42 million bu. and lowered carryover 29 million bu. However, USDA raised its world wheat carryover projection slightly. Look for some support to begin to develop as wheat establishment in a few unirrigated areas of China is not quite what it ought to be for this time of year. The same is true in many U.S. Plains and Midwestern locations. Southeastern Europe has been dry-biased throughout its autumn planting season as well and too much rain as delayed planting in the north. Each of these areas still has favorable production potentials for 2020, but a little more vulnerability to winter weather extremes may exist this year because of poor establishment.  

Cotton:  December cotton futures prices closed down 43 points at 64.29 cents, while the March contract lost 49 points to 66.08 cents. The cotton market was under pressure Monday after President Trump said last Friday that he has not agreed to the rollbacks of tariffs sought by China, increasing doubt about when there may be a signed deal on Phase 1 of a trade agreement. Trump said over the weekend China wants a deal “much more than I do,” in advance of a speech he’ll give Tuesday on trade at the Economic Club of New York, which traders will be watching for more clues. Cotton market bulls are disappointed prices have not rallied following last Friday’s USDA report showing lower U.S. and world production and ending stocks estimates for the 2019/20 crop year, and projected U.S. exports remaining unchanged.

Hogs:  February lean hog futures closed down $0.175 at $73.725 today. Prices closed nearer the session high. Hog futures traders were a bit disheartened by President Trump’s comments last Friday that he has not agreed to roll back tariffs on Chinese imports to conclude a trade deal. Still, Trump described the U.S.-China trade talks as going “very well.” Domestic pork demand is improving, with the latest cutout value at $82.67--the highest since Aug. 16. However, today's preliminary Lean Hog Index (for Friday) is down 85 cents at $59.44.  A wild card in the U.S. pork industry continues to be the pork supply situation in China. A doubling of Chinese pork prices pushed consumer prices to a nearly eight-year high in October. Adding to Beijing's food inflation woes, the price of poultry soared almost 67% in October amid increased demand.

Cattle: Live and cattle futures settled high-range with gains of 45 to 85 cents. Feeder cattle also enjoyed an upside day of trade and ended 57 ½ cents to $1.25 higher for the day. Live and feeder cattle futures extended their impressive rally to start the week, and the high-range close bodes well for followthrough buying tomorrow. A coinciding rally in the product market has helped pushed futures higher, with Choice moving another 83 cents higher Friday and Select climbing 24 cents. Steadily rising beef prices have kept packer profit margins strong and the cash market pointed higher. Due to the Veterans Day government holiday, we do not have an official update on last week’s cash action, but trade between $114 and $116 was an improvement from action around $114 the week prior.    

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