After the Bell: Grains, Soy Weaken with Drop in Oil Prices, Dollar Rally

Posted on 11/23/2018 12:11 PM

Corn:  Corn futures closed lower on Friday, extending this week’s decline to the lowest since Oct. 1. December corn fell 2 3/4 cents and lost 5 ¾ cents this week. Prices followed crude oil and stock markets lower. Oil tumbled more than 7% on Friday to the lowest in more than a year further curbing demand for ethanol blending.  Corn market bears gained some downside technical momentum this week as December corn futures fell to the lowest level in more than seven weeks. However, there were signs of some bargain buying with South Korea buying 132,000 tons overnight. Most consumers are waiting for lower prices to extend coverage. Look for more choppy, sideways trading action next week as traders wait for the Dec. 1 meeting between President Donald Trump and Chinese President Xi Jinping.  

Soybeans  Soybean futures closed lower and near the middle of this week’s range. January beans fell 11 ¼ cents this week to close at $8.81. Soybean meal fell  $7.20 this week but oil gained 8 points. Prices were choppy this week on uncertainty about next week’s meeting between Presidents Trump and Xi at the G-20 meetings in Argentina.  Both China and the U.S. have a lot to lose should the two sides fail to agree to at least keep talking about a deal or the framework to get a deal.  The market will move based on the latest comments from the White House or Beijing. President Trump said today that he’s been preparing “all my life” for talks with Chinese leader Xi Jinping. China’s Vice Minister of Commerce Wang Shouwen said Friday that trade teams from both sides “have been in close touch” ahead of the meeting. Tensions remain high, with the U.S. moving forward with plans to restrict technology exports to China. The market believes there is a less than a 50-50 chance of a breakthrough at the gathering.  Also at the upcoming G-20 summit in Argentina, Mexico, Canada and the U.S. will sign the new trade deal that the three nations agreed to in September to replace NAFTA. All three nations will still need legislative approval to ink the deal.  

Wheat:  Winter and spring wheat futures closed mixed on Friday. December SRW fell 7 cents for the week, December HRW fell 21 ½ cents, while December spring wheat gained 3 cents. Egypt’s GASC bought 240,000 MT of wheat Thursday for January delivery, including 120,000 MT of U.S. SRW wheat and 60,000 MT each from Russia and Romania. U.S. wheat is competitive, and the Egypt sales may be the start of a shift to U.S. sales. More important, Egypt paid prices that are the highest in three years.  Futures are deeply oversold and due for a correction. The strength in spring wheat futures may be trying to buy a few acres given the planting problems and emergence delays for winter varieties from Texas to Ohio.  U.S. export sales in the week ended Nov. 15 were 330,400 MT, down 38% from the prior 4-week average, USDA reported Friday. However, shipments during the reporting week climbed 43% above the prior 4-week average and that will help to keep a firm tone in cash prices next week.  Still, total sales commitment for the marketing year remain 15% behind last year. Until sales are consistently in the range of 700,000 to 900,000 MT on a weekly basis the market will struggle.  Wheat prices relative to corn are as cheap as they were earlier this year before prices began a strong rally. Basis levels have been firming as merchants want to acquire high-protein inventories. Russian wheat offers in the Egyptian tender were variable and in a wide range, that a sign that exporters are beginning to have problems source high-quality wheat and positive for improving U.S. sales into year end.   

Cotton:  Cotton futures finished  lower and near session lows erasing earlier gains this week.  March futures fell 102 points this week after touching 77.20, the lowest since Oct. 8.  Weakness in cotton futures came largely from falling global stock and oil markets and a stronger U.S. dollar index. Net new sales in the week ended Nov. 15 rose to 210,500 running bales, (RB), the most since the marketing year began, USDA reported on Friday. China bought 31,700 RB for 2019-20 season delivery and shipped 20,000 RB last week.  Cotton futures are trading right around support at the October low. If that support remains intact, it would suggest a short-term low has been forged, which could trigger fresh chart-based buying. But if support at the October low falters, futures would likely move the next leg lower.  China remains a long-term key to the demand side of the cotton market. A lot is riding on President Donald Trump’s meeting with Chinese President Xi Jinping on Dec. 1.  

Hogs: Hog futures finished 80 to $1.65 higher through the April contract on Friday. December futures fell $1 this week while February gained $1.05. Midday pork prices were fractionally higher amid another larger weekly slaughter. China will adjust its rules on controlling the spread of African swine fever to keep pork supplies stable, said an official on Friday, even as the country reported the first cases of the disease to be discovered in its capital. The highly contagious disease was found on two farms in a southwestern district of sprawling Beijing.  December Lean hog futures were pressured this week by the large slaughter pace and by lower cutout values, though wholesale pork prices firmed by late week.  If the product market doesn’t strengthen it could lead to more price pressure early next week. USDA’s Cold Storage Report showed U.S. pork supplies at 570.6 million lbs. at the end of October versus 598.4 in storage at the same time last year. The smaller inventory in the face of big slaughters confirms strong demand for pork.  The wild card in the hog market is the latest developments on the African swine fever (ASF) outbreak in China

Cattle:  Live cattle futures finished 17.5 cents to 70 cents higher today through the April contract.  December futures rose $1.75 this week. January feeder cattle posted a gain of $2.85 this week.  Cattle futures had a second day of positive reaction to USDA’s Cattle on Feed Report, which showed on Wednesday that supplies will tighten up a little going into 2019. Midday beef prices were slightly higher on Friday. The Cold Storage Report also signaled beef demand is strong.  Some cash trading this week at $116 to $117, up from a week ago and adding support to the December contract. Thanksgiving came early this year, which gives retailers an extra week before Christmas to feature beef. Based on beef movement this week, that may indeed be what they are gearing up for. Focus amongst cattle traders next week will likely be on post-Thanksgiving beef trade.  


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