After the Bell: Pressure Persists

Posted on 05/08/2019 3:08 PM

Corn: Nearby corn futures closed down around 2 cents today and near the middle of the day’s trading ranges. Corn prices are being pressured in part today by a drier but cool Midwest weather forecast for about seven to as much as 10 days after this week’s storms move out on Friday. That is expected to result in increased planting progress next week. However, moderate to heavy rains may return in the 10-15-day period, so the window for real planting progress is narrow. Buying interest in corn continues to be limited by fears China and the United States are a long way from ending their trade war, with both sides now taking steps to raise tariffs on one another. This situation remains very fluid and could dramatically change in the coming days. The U.S. Trade Representative’s office has filed the tariff rate hikes in the Federal Register and they will take affect at 12:01 a.m. Friday morning. U.S. weekly ethanol output rose 12,000 barrels per day (BPD) to 1.04 million BPD. Ethanol inventories fell 227,000 barrels to 22.47 million barrels.

Soybeans: Soybeans were weaker most of the session and closed near the bottom of the daily price range. July fell 3 ½ cents to close at $8.27 ¼, with November down 2 ½ cents to $8.50 ½. Prices fell on more China trade fears and expectations for a bearish USDA report Friday that shows larger U.S. and world inventories. The weather is wet for a couple more days, then turns drier but cool next week before things turn wet again the following weekend. Weather leans slightly positive at current prices as the incentive to switch from corn to soybeans is limited and suggesting more prevent-plant crop insurance options. The average guess for old-crop ending stocks for Friday’s USDA report is 920 million bu., up from the April USDA estimate of 895 million. On the new-crop, the average guess for production is 4.2 billion bu. from a yield of 49.8 bushels per acre (BPA), compared with last year’s production of 4.544 billion bu. and yield of 51.6 BPA. The average guess for new-crop ending stocks is 910 million bushels. On the world numbers, the average guess for old-crop world ending stocks is 108.5 MMT, compared with the April estimate of 107.4 MMT, and the average guess for new-crop world stocks is 109.6 MMT. About 67% of the time, the average trade estimates for U.S. new-crop ending stocks in May is too large. So, there could be a bullish surprise on Friday. 

Wheat: Winter wheat futures saw two-sided trade today and most contracts were able to finish mid- to high-range with fractional to 2 ½-cent losses for the day. May SRW wheat was even able to settle with a slight gain. HRS wheat futures also finished high-range, with losses of ½ to 1 ¼ cents.  Wheat futures saw some light corrective trade at times today, but the trend of the market remains down and futures are still trading under near-term resistance at the 20-day moving average. Fundamentally speaking, there is little for market bulls to get excited about for the time being. While wet weather has slowed spring wheat planting and raised some quality concerns with the SRW wheat crop, a dry period lies ahead. And USDA’s reports at week’s end are likely to remind of abundant wheat stocks in the U.S. and around the world. The department’s first survey-based winter wheat crop estimate is expected to come in near 1.277 billion bu., up from year-ago levels.

Cotton: Futures prices closed down 87 points in the July contract and off 21 points in the December. July futures today hit a 1.5-year low and December a 13-month low. Buyers were scarce in the cotton futures market today as traders scrutinized the latest U.S.-China trade moves. President Trump appeared more upbeat on an agreement being reached later this week, via a tweet today. However, China’s state media said China won’t be intimidated by Trump’s tweets. China’s Vice President Liu He is returning to the U.S. with trade negotiations to resume on Thursday, just hours before new U.S. tariffs go into effect. A trade deal and stability on the matter would be bullish for cotton and other U.S. ag markets. Bottom line: Nobody has any idea what's going to transpire over the next three days. This keen uncertainty is presently bearish for cotton prices. Traders are awaiting Thursday morning’s weekly USDA export sales report.

Hogs: Futures ended mostly lower and toward the lower end of today’s trading range. June hogs were down 70 cents to close at $88.55 and October fell $1.475 to $84.725.:  Uncertainty about the direction of U.S./China trade talks that begin tomorrow in Washington ahead of imposition of higher U.S. tariffs Friday morning weighed on hogs throughout the session. Early losses on Wednesday were reversed after White House spokeswoman Sarah Sanders said the U.S. had received an indication from Beijing they wanted to make a deal. Earlier, President Donald Trump said he would be happy to keep tariffs on Chinese imports in place. Focus Thursday will be on the weekly USDA export sales report after several weeks of limited new business with China. Wholesale pork cutout values fell $1.12 at midday after jumping $2.78 yesterday. Movement was moderate. Slaughter this week is down 5,000 head from a week ago and up 42,000 head from a year ago.

Cattle: Live cattle futures finished low-range with losses of $1.20 to $1.80 through the December contract. Feeder cattle futures ended with losses of $1.35 to $1.725 through the November contract.  The recent bearish tone continued in the cattle market today as funds continued to shed long positions. Sell stops were triggered as support levels were violated. With the low-range close and technical breakdown, the market is at risk of followthrough selling, as the path of least resistance is down. Cash cattle trade so far this week has been mostly in the $120 to $122 range.  June live cattle futures widened their discount to the cash market, finishing today around $10 below the midpoint of that range. Seasonally, the cash market typically drops $10 to $12 from the peak to the spring/summer low. The cash market has already dropped around $8 this year. That suggests June futures are excessively bearish compared to the “normal” seasonal decline. But for futures to put in a low, the cash market likely needs to stabilize. 

 

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