After the Bell: Small Friday Gains Pare Some of Weekly Losses in Grains, Soybeans

Posted on 08/02/2019 2:55 PM

Corn: Nearby corn futures gained around 7 cents today. For the week, however, December corn lost 15 cents. Short covering and a corrective technical bounce were seen Friday, but the bulls have been badly wounded the past two weeks, suggesting the chart-based sellers will be back at it early next week. The U.S. Midwest weather forecast has below average temps over the next 10 days with less than average rainfall. Organized rainfall for the end of next week has been removed. It won’t be completely dry but not as wet as forecast earlier this week when prices were on the defensive.  There is little weather premium left in the market ahead of the USDA Aug. 12 Crop Production report. The corn market has erased most of the yield risk price premiums and may trend sideways into the Aug. 12 USDA Crop Production Report. This is USDA’s first survey-based estimate but this year the government will only survey farmers and wait until September to take field measurements. USDA also resurvey 14 states for planted and harvested acreage forecasts after the June report did not reflect final decisions because of the rain-delayed plantings

Soybeans: Soybeans ended slightly higher, paring steep weekly losses to two-month lows. November soybeans rose 3 ¼ cents to $8.68 ½ and down 35 ¾ cents this week. The markets largely ignored slightly drier midday Corn Belt weather forecasts as prices slipped from the day’s best levels by the close. The market will be highly dependent on weather for next week with some forecasters suggesting drier and warmer weather will develop next week. Chart momentum is negative but oversold. November beans held key upside gap support from May 28 this week. That might be enough for funds to pare large net-short positions next week, ahead of the USDA Aug. 12 Crop Production report. That will be the government’s first survey-based estimate this year and include new planted and harvested U.S. acreage estimates after USDA resurveyed farmers in 14 mostly Midwest states. The focus the remainder of August is all about weather and crop development. Most do not expect to see much progress on U.S./China trade talks ahead of the President Trump’s threat to impose a 10% tariff on $300 billion of Chinese goods on Sept. 1

Wheat: Wheat futures finished moderately to sharply higher, paring weekly losses. September SRW rose 15 cents to $4.90 ¾, paring this week’s decline to 5 ¼ cents. HRW September futures rose 6 cents to $4.21 ¾. Spring wheat rose 2 to 4 cents on Friday. Impressive trade for wheat to end the week, with SRW wheat the upside leader, a sign of fund short covering and maybe some new buying. What sticks out was September SRW wheat is only down only a nickel for the week and spring September down less than 3 cents given the amount of volatility that we have had this week. Wheat lacks a bullish storyline, but with global wheat prices trying to form a bottom, it just isn’t the time to be bearish either. One last thing, on this break HRW wheat is almost competitive on the world market.

Cotton: December cotton futures gapped lower on the daily bar chart today, hit a contract low and lost 295 points. For the week, December cotton was down 512 points. Trading in cotton futures Monday morning will be extra important. The key question is whether traders reckon the price pressure late this week is overdone and a corrective bounce is due, or if the strong selling continues early next week because of the serious technical damage inflicted. President Trump said Thursday that he will add a new 10% tariff on $300 billion of Chinese-made products on September 1. Needless to say, China has promised a response, without elaborating what measures they would take. The U.S.-China Business Council (USCBC) said Thursday that U.S. President Donald Trump's plan to impose more tariffs on Chinese imports will not facilitate an agreement but lead to more difficulties. This matter will continue to have a significant impact on the cotton market, and so far it’s been all bearish. Improving U.S. cotton crop conditions are pointing to larger U.S. crop potential in the USDA Aug. 12 report.  

Hogs:  Hogs closed making new weekly lows and the lowest prices in five to nine months. October futures fell $1.75 today to $65.725 after touching the lowest since early November. The market was roiled this week by President Trump vowing to impose new tariffs on Chinese goods, partly in response to a failure of China to follow through on buying U.S. farm goods. Adding to the insult was Thursday’s weekly USDA export sales report showing China cancelled more prior purchases than Mexico bought this past week. Morning average cash hog prices fell $1.04 to $76.95 and down from $79.75 a week ago. Midday pork cutout values fell 98 cents to $86.81, but still up from $84.38 a week ago. Ham prices reached a new five-year high this week, and bellies and hams are starting to see some strength. Midday business was active, but we’ll see how the daily sales end. It will take several weeks of stepped-up Chinese pork sales and shipments to rebuild bullish sentiment. The hog market remains hostage to funds flying in and then dumping positions several times since China announced its hog herd had contracted African swine fever.  

Cattle: August live cattle closed down 22 1/2 cents at $107.65. October live cattle fell 90 cents to $107.825. For the week, October live cattle lost $2.07 1/2. August feeder cattle fell $1.60 to $139.625 today, hit a nearly four-week low and lost $4.10 on the week. Look for some follow-through selling in the cattle futures markets on Monday morning following their poor Friday performances that left prices at or near the weekly lows. Still, after rising four of the past five weeks, this week’s setback has not seriously damaged the shallow uptrend.  With marketings very current, overall beef demand remaining good and smaller slaughter levels, look for a continued recovery in the cattle market to end the summer and heading into autumn. The U.S. employment report today showed a steadily growing economy, which should also keep consumers looking for beef at the meat counter in the coming months.

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