After the Bell: Soybeans Benefit From Light Year-end Short-Covering

Posted on 12/29/2017 1:55 PM

Corn: Corn futures faced light pressure throughout the day and settled around a penny lower for the day. The market ended marginally lower for the week, with the front-month dropping 41 1/2 cents since the start of the year. Beneficial rains are expected to fall in Argentina over the weekend, with the next rain event expected Jan. 8-13. Improved weather in the country and ongoing favorable conditions in Brazil have limited buying interest both the corn and soybean markets. That is unlikely to change near-term.  

Soybeans: Soybean futures benefited from short-covering today that helped the market to finish 4 to 6 cents higher and nearly in line with week-ago levels. Soybean futures remained within the boundaries of the steep downtrend this week, which signals bears clearly have momentum on their side as the calendar flips to 2018. When traders return on Tuesday, their focus will be on South American weather and demand. There is some rain in the forecast for Argentina this week, but warm temps are increasing water needs and the forecast for next week is drier. However, conditions in Brazil have largely been favorable.

Wheat: HRW wheat futures favored a firmer tone today and posted slight weekly gains, while spring wheat was lower amid spread unwinding, but still posted slight weekly gains. Key in early 2018 will be if traders continue to lighten their short exposure to the market, as that has contributed to the recent price bounce. Traders next week will also be analyzing weekend weather, as freezing temps are expected to dip well into the Southern Plains where the crop lacks snowcover. While it will take several months before damage is actually known, some veteran crop scouts say the weekend event will do some damage.

Cotton: Cotton futures saw a mix of followthrough buying and profit-taking to wrap up the day, week and year, with futures settling mixed to slightly lower. The market posted strong gains for the week and the year. Cotton futures extended their sharp rally this week. While momentum clearly favors market bulls, the nine-day Relative Strength Index continues to signal the upside has been done, meaning a time or price correction is needed. Be ready to rip off some more sales if the market shows signs of topping.

Cattle:  Live cattle futures saw a choppy day of trade and ended split with the front-month down $1.55, February through June 17 1/2 to 70 cents lower and deferred months up slightly. Feeder cattle settled 40 to 55 cents higher in most contracts. Both markets posted solid gains for the week. As of today’s close, we were still awaiting word on today’s cash action. Traders went into the weekend expecting higher prices due to stressfully cold conditions across the country’s midsection, and futures reflect that. If cash prices end up being better or worse than expected, futures could respond.

Hogs: Hog futures favored a firmer tone throughout the day, but buying waned into the close and futures posted slight losses in all but the front-month contract. For the week, futures still posted sharp gains. Bulls clearly have the advantage heading into the new year. But with futures nearing overbought territory according to the nine-day Relative Strength Index, there is risk of profit-taking when traders return on Tuesday. Additionally, February hogs hold around a $10 premium to the cash index, although some weather premium is warranted and supplies are expected to tighten seasonally.


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