After the Bell: Quiet Grain Market Recoveries Ahead of USDA Report Next Week

Posted on 08/07/2019 2:51 PM

Corn: Corn prices opened higher and closed higher after morning selloff. December corn rose 1 ½ cents to close at $4.14. Underlying support stems from trade expectations for USDA to cut the size of the U.S. crop in the Aug. 12 update. Traders polled by Reuters forecast corn production would fall to 13.193 billion bushels, down from 13.875 projected by USDA in July. However, the range of estimates is nearly 800 million bu.-- 12.723 billion to 13.550 billion bushels.  Weekly ethanol production rose 9,000 barrels per day, to 1.04 million barrels per day, but ethanol inventories plunged 1.35 million barrels, to 23.12 million from a record a week earlier. Demand improved for the summer driving season. The next face-to-face U.S./China negotiations are “likely to happen as planned,” even though the prospects of a deal are dim, Wei Jianguo, a former vice-minister of commerce responsible for foreign trade, told the South China Morning Post (SCMP).  The SCMP reports video conferences are scheduled this month to lay the groundwork for revisiting substantive issues in the September meeting, citing an unnamed official who has been briefed on trade talks by the U.S. government

Soybeans: Soybean futures favored the downside today, but the market finished with modest gains of a penny through the May contract. Soymeal posted hefty losses and soyoil futures settled 43 to 48 points higher for the day.  After breaking to the downside as the calendar flipped to August, soybean futures have consolidated as uncertainty stems from many fronts. The recent selloff was triggered by President Donald Trump’s announcement the U.S. plans to hit another $300 billion worth of Chinese goods with 10% tariffs Sept. 1 and his subsequent labeling of China as a currency manipulator. But top-level meetings are still expected to take place next month and meetings to lay the groundwork for talks are taking place. So while the end zone is likely a long way off, tensions have cooled a bit. Analysts surveyed by Reuters expect the department to report harvested acres at 79.89 million with an average yield of 47.6 bu. per acre, translating to a 3.80 billion bu. crop. But the range of guesses was very wide. More choppy trade is likely until the data is released. 

Wheat: Wheat rebounded from a three-day low to close mixed. September SRW futures rose 4 ¼ to $4.88 ¼ and September HRW futures slipped ¼ cents to $4.17 ¾. Spring wheat futures fell about a penny. Wheat rebounded in sympathy with the recovery in corn futures today.  Export business is quiet this week, with traders looking for sales last week to come in between 250,000 to 500,000 metric tons, compared with 383,066 MT last week. Monday’s USDA Crop Production Report will likely show a small gain in U.S. production, according to analysis polled by Reuters. Look for a slightly higher U.S. carryover forecast but USDA will probably reduce the global inventory forecasts in response to smaller world crops this month. While Canadian crops are drying out as the crop begins to head and budding dryness in Argentina is raising early concerns, the global supply will remain burdensome. That increase in global competition will be an anchor on wheat rallies unless the corn markets get bullish news and takes off to the upside.

Cotton: December cotton futures closed up 11 points at 58.83 cents today. Prices closed near the session high and scored a mildly bullish “outside day” up on the daily bar chart. Prices Monday touched a new contract low. There was some tepid short covering in the futures market today, following recent strong selling pressure. Buyers were limited, however, by a sell-off in the U.S. stock market and world economic and financial jitters presently gripping the marketplace. Crude oil prices’ drop to a new low for the year is also a bearish outside element for the cotton market. Thursday’s weekly export sales report will be closely scrutinized by cotton traders. Recent U.S. sales have been lukewarm. We’ll see if lower values spur any fresh business. Next Monday’s USDA monthly supply and demand report is the next big data point for cotton traders. Improving U.S. cotton crop prospects have most cotton market watchers looking for a report that will be neutral to bearish with larger production and inventories.  

Hogs: August hogs that expire a week from now finished 60 cents higher today. Deferred months posted gains of $2-plus. Lean hog futures were supported by corrective buying amid the sizable discounts they hold to the cash index. But with the cash market softening, there isn’t an urgency for traders to greatly narrow those spreads. It’s going to take a period of renewed strength in the cash market to encourage sustained buying in hog futures. The average national direct cash hog price was $2.03 lower this morning. While packer margins are solidly in the black, slaughter numbers remain plentiful enough they aren’t having to increase cash bids to attract enough animals to fill kill lines.  

Cattle: October live cattle futures closed up 22 1/2 cents at $106.45 and the December contract gained 27 1/2 cents to $111.175. November feeder cattle futures closed up 20 cents at $138.90. Iowa, Nebraska and Texas saw some cash cattle trade in the $185 area on Tuesday, which was steady with the week prior. But otherwise, all has been quiet on the cash market front. The trade is still looking for higher prices this week. Boxed beef values continue to creep higher, with Choice gaining 65 cents and Select up 15 cents at midday today. Movement was light at 98 loads. The beef market could be seeing a lift from some Labor Day buying. Weekly USDA export sales Thursday morning will be closely examined for price direction after the recent slowdown in new business.  

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