After the Bell: Grains, Soybeans Slide on a Lack of Demand and U.S. Crop Clarity

Posted on 08/06/2019 2:49 PM

Corn: Nearby corn futures prices closed down 1 1/4 to 2 1/4 cents today and near mid-range in quiet trading. Prices opened higher in overnight trading on a small decline in USDA crop ratings and ongoing dryness across parts of the Midwest. However, overnight showers in parts of the Corn Belt provided some much-needed moisture to boost crop development in some areas from Iowa to Illinois. More rain is needed, however, especially from Illinois to Ohio.The sell off from yesterdays’ China currency announcement may have short legs as markets wait for USDA’s Crop Production Report. Late Monday the Trump administration labeled China a “currency manipulator” after the Chinese central bank allowed the renminbi (yuan) to fall to the lowest level against the U.S. dollar in almost 11 years and helping to offset the imposition of U.S. tariffs. While this significantly bearish element may be mostly factored into present corn futures prices, the uncertainty of the situation is still likely to somewhat limit any upside in corn prices. Trading is likely to be sideways and choppy heading into next Monday’s highly anticipated USDA monthly supply and demand report.

Soybeans: Soybeans closed lower and near session lows. November fell 3 cents to $8.65 ¾. Soybean meal futures were fractionally higher, while soyoil futures fell on light spread trading. Beans closed where they opened after trying to rally overnight. The market took the current weather forecast neutral after overnight showers fizzled as they moved south out of Iowa and Wisconsin into Illinois. A few more scattered rains are possible later this week. Soybean condition last night came in at 54% “good” to “excellent”, unchanged from a week ago. Some 9 states improved and 7 declined, with the results geographically scattered, while 15 states showed declining soil moisture, and 2 had increasing moisture. A reported 37% of soybeans were in pod set, versus 63% average for the date. Rallies remain capped by increasing concerns the trade war will linger and talk about China shopping for soybeans in Brazil for fall delivery. Trump told reporters he would consider more aid to farmers if necessary. Yesterday, the Trump administration labeled China a “currency manipulator” after the Chinese central bank allowed the renminbi (yuan) to fall below to the lowest in almost 11 years and could offset the imposition of U.S. tariffs.  

Wheat: Winter wheat futures lost 7 to 10 1/2 cents today and prices finished nearer their daily lows. Spring wheat futures closed with losses of 2 to 3 cents. Prices opened steady to lower this morning after trying to rally overnight. The lowest offer for wheat at an Egyptian state purchase tender was $198.70 per metric tons (MT) for 55,000 MT of Ukrainian wheat, traders said. No U.S. wheat was offered, as expected. World wheat supplies remain plentiful and at a lower cost than U.S. wheat on offer. France’s farm ministry raised its soft wheat crop estimate 1.2 MMT, to 38.2 MMT. The crop was far enough along that record-breaking heat had limited impact on the crop. That’s a 12% increase from last year’s drought-clipped crop. Rains may develop in parts of the Canadian Prairies later this week, providing a timely boost in soil moisture.

Cotton: Cotton futures settled 24 to 36 points higher through the May 2020 contract. Cotton futures posted mild gains today, but following recent, sharp losses, it’s difficult to say today’s price action was anything more than a pause in the bear market. The fact that buyer interest wasn’t stronger following a sharp drop in crop condition ratings Monday suggests the upside will be limited without bullish demand news. USDA slashed 7 percentage points off its “good” to “excellent” cotton crop condition ratings, dropping them to 54% as of Sunday. On the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the cotton crop dropped 9.8 points and is now nearly five points below the five-year average. But with some big crop estimates floating through the market, it’s going to take extended declines in crop ratings to grab traders’ attention, especially with concerns over Chinese trade relations and the negative impacts that will have on U.S. export demand.  

Hogs: Futures closed making new session lows despite firming in fresh pork prices at midday. October futures closed down $2.825 at $64.60 Lean hog futures opened higher but could not rise above Monday’s high and slumped the remainder of the session.  Nonetheless, futures probably need to close above Monday’s high to turn the sentiment positive and suggest the escalating U.S./China trade tensions are getting closer to fully priced into the market.  USDA’s International Trade Report showed U.S. pork exports in June totaled 499 million lbs., a 9% increase over last year, the largest June export rate on record. Exports to most major destinations were lower for the month, but a spike in exports to China produced much of the year-over-year increase. Unfortunately, the increase in exports offset just 36% of the June production gain, which was also record large at 2.128 billion pounds. Stronger exports will be needed in the second half of 2019 to offset prospects for record production.

Cattle: Live cattle futures got off to a firmer start, but buying eventually petered out and futures finished with moderate losses of 67 ½ cents to $1.175 on the day. Feeder cattle were able to muster a midrange and mixed finish. Today marked an inside day of trade for both markets. Fundamentals remain pretty positive for the cattle market and while the market flirted with some technical damage yesterday, live cattle futures were able to finish well off their lows Monday and the market did not see aggressive followthrough selling today. Boxed beef prices strengthened this morning, with Choice up $1.08 and Select gaining 75 cents. The spread between the cuts remains wide, which signals tight supplies of well finished cattle. Movement has been fairly light in recent days, including a light load count of 60 this morning.

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