After the Bell: Soy, Grains Rally on Weaker Dollar, South America Weather Concerns

Posted on 01/03/2019 2:30 PM

Corn: Corn futures ended moderately higher, making new session highs at the close. December corn was up 4 cents to settle at $3.79 ¾. The corn market found more buying interest on weakness today amid expectations for a pop in export demand. The market shrugged off sharp declines in U.S. and global stock markets and focused instead on a sharply lower U.S. dollar and a small rebound in crude oil prices.  While money may be exiting stocks, it may find a home in commodities, especially if the dollar continues to weaken. The signs of slowing U.S. and Chinese economies put more pressure on negotiators to reach a tentative deal when the two sides meet next week in Beijing. Some buying was also tied to drier, warmer weather forecasts for Brazil, returning to the drier pattern that has been in place for central Brazil since Dec. 1. A few light showers this week will not offset 30 days of much-below-normal rainfall. In Argentina, heavy rains continue to cause a few planted and early development problems across north-central regions.

Soybeans:  Nearby soybean futures prices closed up 3 1/2 to 5 1/2 cents today and near their session highs. Soybean meal contracts were up around $1.50 in the nearby and bean oil was around 20 points higher. Futures prices were boosted by U.S. export demand hopes today. Talk China bought more than 1.2 MMT of U.S. soybeans Wednesday remains unconfirmed by USDA with federal government offices closed by the budget impasse.  Bloomberg News today reported Cefco Corp., China’s biggest food company, is asking for pricing for February and March delivery. A U.S. delegation will be heading to Beijing during the week of Jan. 7 to further flesh out trade details. China and U.S. negotiators are getting closer to a deal ahead of key meetings next week in Beijing, a former Chinese trade official told Bloomberg News. “I’m optimistic about the outcome,” said Wei Jiangsu, who was vice trade minister until 2008.

Wheat: Wheat futures were led higher by 10 to 11 cent gains in the HRW and HRS markets. SRW futures finished 6 to 7 cents higher. All three markets closed high-range.  Wheat futures were supported primarily by technical-based buying as prices bounced back after holding key support levels. A sharp drop in the U.S. dollar index was also supportive as prices for U.S. wheat are competitive on the global market and exports from the Black Sea region are starting to ease after an aggressive shipping pace, primarily from Russia, during the first half of 2018-19. But it’s going to be difficult to find sustained strength from the export side of the market with data from USDA shelved until the government shutdown ends. Weekly export sales data that would normally be released tomorrow is a casualty of the government shutdown. Heavy rains and flooding in areas of Argentina continue to cause problems with later-harvested wheat.

Cotton: Nearby cotton futures finished with fractional gains and losses in relatively quiet dealings. Prices ended near session lows after a midday rally off fresh 13-month lows this morning. Sharply lower world stock markets continue to weigh on the cotton futures market, including worries about global demand if world economies start to contract. Weak manufacturing data out of U.S. today followed similar data from China and Europe on Wednesday. Strong losses in the U.S. dollar index today erased most of Wednesday advance and provided some support and helped to reduce the cost of U.S. cotton for overseas buyers. The market needs fresh export demand to see a more bullish tone develop.

Hogs:  February lean hog futures gained 70 cents, while the April contract was up 7 1/2 cents. Some short covering in the futures market was featured today, following recent selling pressure. Cash hog bids are firmer this week and will need to lead rallies given the premium futures currently hold. Fresh pork values are also building a base of support that maintains favorable packer margins. The average national direct cash hog price firmed 93 cents Wednesday, accelerating recent price strength. The strong cash bids suggest some plants were short-bought on slaughter supplies coming out of the holiday and also gives traders some hope the cash market may continue to strengthen seasonally. Odds of a U.S./China trade deal appear to be rising. Both sides have a clearer sense of each other’s goals and intentions, a former Chinese trade official said ahead of negotiations in Beijing next week

Cattle:  Live cattle closed moderately lower and in the upper half of the large price range, while feeder cattle futures closed sharply lower and near session lows. Feb. live cattle fell 30 cents to $123.225, while April closed down 37.5 cents at $125.40. Cash cattle traded near $123 today in Kansas, fully steady with last week and helped live cattle climb from the day’s worst levels. However, beef prices were marked lower at midday with Choice off 26 cents and Select falling 57 cents. The beef cutout outperformed the pork cutout towards the end of December on stronger beef demand at retail groceries. It looks like demand is shifting back to cheaper pork and chicken features in early 2019. Tomorrow’s monthly unemployment report will be closely monitored for any signs of slippage in what has been a strong labor market. Continued job growth augers well for sustained beef demand this year.

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