After the Bell: Grains, Soy Stabilize as Price Declines Uncover New Demand, Short Covering

Posted on 11/19/2019 3:01 PM

Corn: December corn futures settled midrange and up 2 1/4 cents, but many of the other contracts finished in the upper end of today’s trading range with gains of 3-plus cents.  Corn futures recouped Monday’s losses after failing to take out yesterday’s lows, which triggered a round of corrective buying. Fundamental support for the corrective buying came from another daily export sale – this time 191,000 MT sold to unknown destinations. That followed a daily sale of 132,000 MT of corn to unknown destinations on Monday. While export demand remains price-negative amid the terrible start to the marketing year, the daily sales the past two days suggest prices dropped far enough to encourage some value buying from global end-users. The problem, however, is that a sustained pickup in export sales is unlikely. Traders are also concerned that just over three-quarters of the U.S. corn crop was harvested as of Sunday, 16 points behind the five-year average. With weather delays and propane shortages, the lengthy harvest season is likely to drag on, increasing risk of harvest loss. But like with export demand, upside potential on crop-loss concerns is limited.

Soybeans: Futures ended higher but near session lows. January soybeans gained 1 ¼ cents to $9.11 ½. January meal futures rose 40 cents to $304.20 and soybean oil jumped 34 points to 31.15 cents. The increased U.S. export competitiveness in world grain trade has offered support along with end-user buying for early 2020 use.  The outlook is for a modest recovery in prices, with farmers’ bin doors closed tight after the price drop. The U.S.-China trade talks remain bogged down on specifics. Phase 1 talks continue to focus on getting China to commit to a specific dollar amount and farm products that Chinese negotiators have balked at in the past, the New York Times reported. A Phase 1 U.S./China trade deal is needed to ignite a sizable CBOT rally. U.S. President Donald Trump said on Tuesday that he would raise tariffs on imports of Chinese goods if no trade deal is reached with Beijing. Speaking at a cabinet meeting at the White House, Trump added China is going to have to make a trade deal. Soybean oil renewed its rally against the soymeal market amid rising palm oil prices and improving global biodiesel production. Bloomberg News is reporting that the $1.00 biodiesel credit is being worked by House Democrats, which would be phased over the next 5 years. The House Tax Writing Committee is proposing the $1.00 credit return in 2020 and run through 2021, and then be phased down to $.75/gallon in 2022, $.50 in 2023, and $.25 in 2024, before it is eliminated. This sunset provision is offered to aid biodiesel producers that are struggling with today’s low margins.

Wheat: Futures ended higher today but near midrange. December SRW futures rose 4 ¾ cents to $5.12 with December HRW rising 7 ¼ cents to $4.25 ¾. Spring wheat finished fractionally lower. Futures rose for a second day after testing key support amid declining U.S. winter wheat crop ratings and signs U.S. prices are getting competitive on the world market. USDA reported that 52% of the U.S. crop was rated in “good” and “excellent” conditions as of Sunday, down from 54% the prior week and a larger decline because of last week’s cold weather. French wheat prices rose on expectations for increased business in Algeria’s tender for wheat this week. Wheat prices remain supported by rising Russian wheat prices and sluggish exports. Between July 1 and Nov. 14, Russia has exported 19.4 MMT of grain, according to the country’s ag ministry, citing customs data. That’s well under the 22.6 MMT of grain the country shipped last year during the period. Thousands of workers at Canada National Railway (CN), the country’s largest railway, went on strike for the first time in a decade on Tuesday, disrupting the shipping of commodities. Canada, one of the world's biggest exporters of farm products, relies on its two main railways, CN and Canadian Pacific Railway (CP) to move canola, wheat and other to ports.  The stoppage "has an impact before it even begins because companies pull back sales in anticipation of a strike," said Wade Sobkowich, executive director of the Western Grain Elevator Association.

Cotton: December cotton futures fell 77 points to 63.44 cents today and hit a five-week low, while February cotton lost 62 points to 65.35 cents. Both contracts ended the day nearer their session lows. The cotton futures market today saw price pressure from more tariff threats on China by President Trump. The U.S.-China trade talks also continue bog down on specifics. Phase 1 talks continue to focus on getting China to commit to a specific dollar amount and farm products that Chinese negotiators have balked at in the past, the New York Times reported. Initial Phase 1 talks have both sides agreeing on a $20 billion farm product shopping list, but President Trump told his negotiators to set the figure three times that mark, and then settled on a range of $40 billion to $50 billion. A sharp drop in crude oil prices to a two-week low also spilled over into some pressure in the cotton futures market today. USDA’s weekly crop progress report on Monday afternoon showed U.S. cotton harvest at 68% complete.

Hogs: December lean hog futures fell 60 cents to $62.15, while the February contract also lost 60 cents to $69.625. Both contracts fell to nine-week lows today but did rebound off the lows to finish nearer their session highs—suggesting the sellers may now be exhausted. While pork demand is improving, hog slaughter hit a new record high last week. Traders continue to take out the premium futures are trading to the cash market. Big supplies are winning the battle this week amid uncertainty about if or when there will be a China trade deal that reduces tariffs on imported U.S. pork. President Trump today again threatened the U.S. could slap more tariffs on China. Wholesale pork cutout values rose another 61 cents to $89.32 today on good movement of 204.99 loads. That’s near the two-year peak reached on Aug. 8. Hams are back near their five-year high touched last week, with picnics this week reaching their highest level in nearly five years. Slaughter continues near record levels this week, up 15,000 head on Monday from a year ago and keeping a lid on rallies until pork cutout values push cash hog bids higher. The national average price slipped 10 cents Monday.

Cattle: Live and feeder cattle futures faced pressure early in the session, but both markets were able to move well off their lows by the close for a high-range, mixed finish. After a steady march higher through fall, live cattle futures have moved sideways the past few weeks as traders waited to see whether cash prices could catch up. Bids have also been working their way higher, but at a slower rate than futures. The result is December live cattle are nearly $3.60 above the national average cash price and February holds nearly a $10 premium. Recent gains have in part been propelled by an impressive product market rally, but beef prices have also faltered of late. This morning, both Choice and Select moved higher, but movements trailed off to 47 loads. That adds to ideas the product market could be working on a top.

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