After the Bell: Soy, Hogs Drop After China Talks End Abruptly

Posted on 09/20/2019 2:41 PM

Corn:  Futures ended slightly lower Friday, paring this week’s advance. December corn fell 2 cents to $3.70 ¾, but up 2 ¼ cents for the week. Corn yields continue to trickle in this week with a few more late this week coming in slightly below year-ago levels on fields that were planted early on the best drained soils. It’s still rare to hear of yields better than last year and many still much below last year. Heavy rains this week and more next week will likely add to harvest delays and slow the flow of yield reports to gauge overall crop potential. The market was support by speculation final production will come in below USDA’s latest projection. Weekly export sales rose to the highest since at least last February, with Mexico a major buyer. More sales are needed with the current forward sales pace well behind last year. Stronger oil prices this week after the drone attacks on Saudi oil installations provided an early lift to corn and ethanol. The market is still waiting on the promised deal between biofuel opponents and proponents on improving the Renewable Fuel Standard. The plan Trump laid out to biofuels proponents and key farm-state lawmakers, sources tell us, would reallocate waived blending requirements via a three-year rolling average, starting with 2016-18.

Soybeans: November soybeans closed down 10 1/4 cents at $8.82 3/4. December meal lost $1.10 at $295.00 and December bean oil was down 57 points at 29.40 cents. Prices closed at or near their weekly lows. On the week, November soybeans fell 14 1/4 cents. Deputy-level U.S.-China trade talks that just restarted this week apparently abruptly ended today with the Chinese delegation reportedly going back home early. President Trump also made downbeat remarks around midday today on the trade talks. This news pressured the soybean futures market today and unless this situation makes another reversal over the weekend it is likely to prompt some more selling interest early next week. Showers and thunderstorms will increase in the Corn Belt starting today, marking the start of a wetter weather pattern in the region during the next two weeks than what has occurred recently, increasing risk to soybean yields and quality. There will be breaks in the rain and some harvesting should advance, especially in the first days of October. Focus will be on actual harvest results as combines roll in the next few weeks. Too much rain recently and dryness have offset the benefits of warmer temperatures for immature crops this month. Evidence of production falling more than the 7.2% currently projected by USDA should sustain counter-seasonal rallies into October.  

Wheat:  December SRW futures fell 3 ¾ cents to $4.84 ¼, paring this week’s gain to ¾ cents. December HRW fell 2 cents Friday to close at $4.07 ½, paring the weekly gain to 7 ¾ cents. December spring wheat rose 4 cents to $5.24 ¼ and up 18 ¾ this week. Spring wheat led a stronger early rally that pulled up the winter wheat markets but slumped late in the session on reports of increased farmer selling. The winter wheat futures may have followed corn and soybeans lower after the Chinese trade delegation said it would not travel to Nebraska and Montana last week, suggesting a snag in talks. Excessively wet conditions in the northern U.S. Plains and Canadian Prairies have hurt the quality of the region's spring and durum wheat crops, potentially tightening supplies of top grades of the wheat variety. Rains and heavy dew have slowed the harvest and, worse, caused mature, un-harvested wheat kernels in some areas to begin to sprout, severely damaging quality and triggering steep discounts from grain buyers of $1 or more per bushel. Weather will be the focus next week including the rains forecast for of the drier areas developing in Australia, Europe, China and the Black Sea region. A flurry of wheat buying this week helped support this week’s rally despite much of the business coming from non-U.S. origins. The buying interest still adds to perceptions wheat prices have formed seasonal lows.  

Cotton:  December cotton futures closed up 19 points at 60.52 cents today. For the week, the December contract lost 176 points. The cotton market did not fare too badly today given the midday news that just-restarted U.S.-China trade talks apparently broke down with the Chinese delegation heading home early. Next week it will be technically important for the cotton futures market to hold above the 60.00 cent level, basis December futures, in order to build upon gains seen the past three weeks that had begun to suggest cotton has put in a market bottom. U.S. cotton exports need to increase before futures prices can rally substantially. Worries about global demand amid rising world cotton supplies will likely continue into the end of the year. The major world economies are seeing slowing growth amid their central banks working to jumpstart demand with more accommodative monetary policies.

Hogs: October lean hogs closed down $1.05 at $60.35 and December futures ended down $1.70 at $66.25. For the week, December lean hogs lost $2.45. Look for follow-through selling pressure on Monday after the late-week price meltdown that produced technically bearish weekly low closes in lean hog futures Friday. The news reports around midday Friday that the just-restarted U.S.-China trade talks in Washington, D.C. apparently quickly broke down hit the hog futures market. The reports said the Chinese trade delegation is headed home early and will not make any U.S. farm visits, which had been reportedly scheduled to occur next week. Weekly U.S. export sales on Thursday were disappointing, with no new large sales to China. Weekly export data will be the key to price direction each week. Pork cutout values rose another 53 cents Friday amid the strongest sales this week in six months. This may limit the downside in lean hog futures prices next week. The African swing fever outbreak could work to support the U.S. hog market at least into the end of the year.  

Cattle:  Fed cattle futures closed lower and near midrange, paring this week’s rally. December cattle fell 67.5 cents to $105.15, ending the week up 77.5 cents. November feeder cattle fell 22.5 cents Friday to $137.025 but up $3 this week.  All major packers have purchased cattle this week in all regions and paid more for them than last week, a positive development. Cattle continue to be trucked all over the U.S. in order to attempt to harvest fed cattle in as timely a fashion as possible. The result is that a few cattle each week that likely would have been harvested are being carried forward. Still, slaughter this week is estimated at 658,000 head, up from 629,000 a week ago and 653,000 a year ago. Choice cutouts at midday fell 90 cents today while Select rose 53 cents.  The good news this week was the active beef sales at the wholesale level. The market should begin next week with a firmer tone. The U.S. and Japan should wrap up a new trade deal next week that will lower beef import tariffs that will improve demand for U.S. beef. The market will also stay glued to the U.S.-China trade talks as they head for high-level discussions next month after meetings this week. China needs to boost imports of meat to supplement production lost to African swine fever.  

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