After the Bell: Quiet Consolidation in Corn, Soybeans Before Holiday Weekend

Posted on 04/18/2019 2:42 PM

CornCorn futures settled narrowly mixed, with old-crop futures steady to ¼ cent higher and new-crop ½ cent lower. The market settled roughly 2 to 3 cents lower for the week. Rains are likely in the Midwest through Friday night and again early next week, which will likely keep planting progress slow. But warmer and slightly drier forecast in the weeks ahead limit concerns about any major planting delays  So long as slow planting and flooding do not turn into major concerns, traders will likely continue to keep quite a bit of focus on U.S. trade issues. U.S. negotiators are reportedly likely to travel to China late this month for another round of trade talks and the goal is for a final trade agreement by late May/early June. But the end zone continues to be pushed back and agreement on the remaining 5% of issues will likely be challenging. Meanwhile, another trade battle with Europe could be brewing. July is the key development month for the U.S. corn crop. The National Weather Service outlook through July favors wet conditions across most corn growing areas and warmer temperatures for the eastern Corn Belt.  

SoybeansSoybean futures prices closed up around 2 cents in the nearby contracts today after falling to 5.5-month lows early on. For the holiday-shortened week, July soybeans lost 14 1/2 cents. Nearby soybean meal prices today finished less than a dollar lower and hit five-week lows. Bean oil was up just over 30 points in the two nearby futures contracts today. Soybeans were pressured this week by worries about demand for U.S. supplies with big crops coming from both Argentina and Brazil. Look for more of the same worries and price pressure next week. Cash traders reported that China bought several cargos of Brazilian soybeans earlier this week and one or two shipments of Argentine soybeans. But no new U.S. sales were announced. Weekly USDA export sales for last week were a disappointing 382,100 MT, down 46% from the prior four-week average and the tally included no new Chinese sales. New-crop sales were also light at 21,100 MT. However, soybean meal sales jumped 94% to 295,300 MT last week from a week earlier, led by the Philippines taking nearly half of the total. Shipments were a strong 382,800 MT, up 63% from the prior four-week average. If the meal market can start to rally, soybeans will follow. History shows the meal futures market can lead significant price recoveries in the soybean complex. Markets worldwide await the end of U.S.-China trade negotiations. The two nations have tentatively scheduled a fresh round of face-to-face meetings as they seek to close out a trade deal, with negotiators aiming for a signing ceremony in late May or early June. Grain markets continue to question whether a deal can be struck prior to world demand shifting fully to South American soybean supplies.

 WheatWheat futures were down 1 to 4 cents today, extending the weekly drop. May SRW futures fell 20 ¼ cents this week to $4.44 ¼, May HRW was down 14 ¼ cents to $4.20 and May spring wheat futures fell 8 cents this week to $5.23 ¼. Wheat futures declined this week on generally favorable global weather and another week of sluggish export business. Sales in the week ended April 11 totaled 317,700 MT, up 16% from the prior week but down 28% from the 4-week average. With only 7 weeks left in the marketing year, shipments are 75% of the annual total, behind the 5-year average of 86% for the date. The weekly Monday morning export inspections report will be closely watched for improvement; otherwise traders will begin lowering 2018-19 annual export forecasts and raising ending stocks.

Rain this week probably results in better HRW wheat conditions on Monday but little progress on planting spring wheat. That will keep the focus on May weather forecasts. Canada’s StatsCan is due out next Wednesday with its planting intentions report, and a Bloomberg survey of analysts has the wheat area average estimate at 25.4 million acres, up from 24.9 million last year as some canola acres are switch to wheat  A drier, warmer outlook is offered for Europe and parts of the Black Sea region the next two months and that could have an adverse impact on final yields if it verifies.  

CottonCotton futures finished with losses of 36 to 80 points today. For the week, May cotton futures dropped 80 points. The uptrend from the February lows paused this week. If this price action was the market catching its breath, the market should attempt to push above the early April highs. If this week’s low is violated, it would signal a short-term top is in place. If futures stay within the recent boundaries, more sideways consolidation trade will be seen. Fundamental focus following the extended weekend will be on U.S./China trade negotiations, though there are not formal talks planned for next week.   U.S. and Chinese trade negotiators are hoping to have a trade deal ready to be signed by President Donald Trump and China’s Xi Jinping by late May or early June. Any deal would likely pave the way for increased Chinese purchases of U.S. cotton. But completing the final 5% of the trade negotiations that are reportedly left will be the hardest part. That could push the finish line further down the road.  

Hogs: Lean hog futures closed up 62 1/2 cents in the June and down 7.5 cents in the July. For the holiday-shortened week, June hogs lost $1.55. Some profit-taking ahead of the three-day holiday weekend was featured today. Hog market fundamentals remain bullish, which is likely to continue to limit selling interest in futures next week. Fresh pork cutout values rose another 60 cents at midday and prices are close to the seasonal highs set last June. Movement today was light. Pork cutout value is up more than $27 from a 10-year low set just two months ago. With summer futures trading $16 to $20 above current cash bids, the pork market must continue to lead on the next rally phase. The weekly USDA export sales report showed sales of 40,300 MT of pork last week, down more 50% from last week’s record but still up 6% from the prior four-week average. China bought 23,500 MT and shipped in 4,500 MT last week. The marketplace awaits the conclusion of U.S.-Chinese trade negotiations. The world’s two largest economies have tentatively scheduled a fresh round of face-to-face meetings as they seek to close out a trade deal, with negotiators aiming for a signing ceremony in late May or early June.  Overall demand for U.S. pork is already good and the spread of African swine fever across China only strengthens worldwide demand for U.S. pork.

Cattle: Live cattle closed mostly higher Friday and feeder cattle futures were mixed, paring some of this week’s gains. June cattle rose 30 cents to $122.675 while October cattle fell 10 cents to $120.10.  June gained $1.225 this week and October rose $1.075.: June live cattle opened higher but could not rise above the past two session’s highs. Futures closed well above session lows and higher for the week, a bullish sign amid cash prices that were up $2 to $3 this week.  The market was supported by the improvement in U.S. beef export sales last week. USDA reported this morning that U.S. beef sales rebounded to 28,800 MT, up 81% from the prior four-week average on increased buying from South Korea and Japan. Today’s monthly Cattle on Feed Report placements were about 1 percentage point above trade estimates, coming in up 4.8% from a year ago. Total on feed numbers were up 2%, larger than the 1.8% increase expected. This report is neutral to slightly bearish. The 2020 contracts posted new highs today and closed lower. Technical indicators were very overbought today and this action suggests at least a pause next week.  Late-April cash fed cattle strength is underway and could continue for into May as packers prepare to ramp up seasonally larger kills. The decline in market weights has stalled and that may be a negative sign.  

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