After the Bell: Strong Weekly Finish for Grains, Soybeans on Rising Weather Risks

Posted on 07/12/2019 3:23 PM

Corn: Prices closed higher and at the highest this month. December corn closed 11 ¼ cents higher at $4.59 ¼.  Prices gained 17 cents this week. The weather forecasts are turning a bit more threatening with drier and warmer weather from across the central Midwest and Southeast the next two weeks. The moisture part of the forecasts remains highly uncertain depending on the path of Tropical Storm Barry after hit reaches Louisiana tonight or Saturday. Flooding in the Delta and along the southern Mississippi River will become serious from heavy rains projected along the path of Barry.   USDA projected the new-crop corn carryout at 2.010 billion bu., versus 1.675 billion last month. The slight increase in U.S. production was received with more than a small dose of skepticism, given the ongoing debate on acres and yield. Most are betting the crop gets smaller in the August WASDE.  USDA daily export reporting service said private exporters sold 104,100 metric tons of corn for delivery to Panama during the 2019-20 marketing year. More sales will be needed to sustain the weather rally. Central Illinois average cash price rose to $4.48 yesterday, the highest since June 2014, USDA data shows. That’s a positive signal.  

Soybeans: Soybean futures prices closed up around 14 cents in the August and November contracts, and near their daily highs Prices hit two-week highs and closed at technically bullish weekly high closes. For the week, November soybeans gained 38 cents. Monday could be one of the more active trading days of the summer in the soybean and corn markets. Bulls were charged up Friday by a very hot and mostly dry weather forecast for the Corn Belt all of next week. If those forecasts hold up over the weekend, then Monday is likely to see strong follow-through buying action, including chart-based buying interest given this week’s strong rebound. However, a flip-flop in weather forecasts for the region to cooler and wetter next week would produce strong downside price pressure on Monday. Monday also finds the June NOPA crush report. U.S. soybean crushings likely declined for a third straight month in June to a 16-month low, according to a Bloomberg poll. NOPA members crushed 154.405 million bushels of soybeans last month, according to the survey.

Wheat: Wheat futures ended with gains for the day and the week. SRW and HRS wheat futures finished steady to 2 ¾ cents higher, while HRW wheat posted gains of 4 to 5 ¾ cents. December SRW wheat futures posted nearly a 10-cent gain for the week. Winter wheat harvest moved past half complete over the past week, which should translate to an easing of hedge pressure. And the forecast means harvest should remain pretty active this weekend. The Northern Plains are expected to receive some timely showers.  Heat and dryness raised some crop concerns in areas like Australia, India, Canada, France, Mexico and the Black Sea region over the past month. As harvest picks up around the world, we will get a better idea of just how much damage was done. In the U.S., attention is on the spring wheat crop. While condition ratings are high, the crop is still well behind the norm in terms of development and the crop will need an extended growing season to finish.

 Cotton: October cotton futures closed down 40 points, with the December contract down 53 points. Both set new contract lows today and closed near their session lows. For the week, December cotton lost a whopping 423 points. Cotton traders on Friday were not expressing any worries about Tropical Storm Barry doing significant damage to the cotton crop despite some areas of the South expected to get up to 20 inches of rain. If Barry is a non-event for the cotton market, look for follow-through technical selling pressure in the cotton market early next week. The cotton market this week was hurt after President Trump took aim at India’s tariffs, threatening U.S. trade retaliation. India has become a major importer of U.S. cotton after its own crop losses. The market was already struggling from slower global demand and Chinese trade friction. An already weak demand scenario for U.S. cotton appears to have taken another hit this week.

 HogsHogs closed mixed to mostly higher. August hogs were up $1.475 to $80.65, while December gained $1.425 to $70.325. Hogs closed higher for a second straight week after falling to the lowest since August to end June. August hogs closed with an outside-week up, a bullish reversal pattern after testing support earlier this week. That should help to support a firmer start next week. Packer bids for cash hogs improved this week but the current futures’ premiums will require more strength next week to continue to move higher. That might prove to be tall order after fresh pork carcass cutout values fell $1.81 at Midday today. The market moved on from the disappointing weekly export sales report released Thursday on speculation sales will be strong in the second half of 2019 into 2020. Price declines the past two months should boost global demand for U.S. pork. The biggest threat to rallies will be continue hog slaughter levels that exceed USDA projections. This week’s kill was estimated at 2.414 million head, 6% larger than a year ago.  

Cattle: August live cattle closed up 62 1/2 cents today, while the October contract gained 65 cents. Both set new two-month highs today and closed at technically bullish weekly high closes. For the week, August live cattle gained $1.57. Meantime, August feeder cattle futures lost $1.12 today, and on the week gained $2.55. Look for some follow-through technical buying in the live cattle futures market on Monday morning, given today’s gains that pushed the market to a two-month high. Cash cattle trade got started in the Iowa/Minnesota market between $112.50 and $115 on Thurs, which was steady to higher compared to last week’s action. Traders are looking for stronger bids to emerge next week.  Nearby cattle futures are still trading below the cash market, which should also encourage some buying interest in the futures next week. Feeder cattle may continue to be being pressured by rising corn prices if the current hot and dry weather forecasts for the Corn Belt are still in place next week. Beef prices were weaker this week but attracted improved demand. Packers’ margins are set to seasonally contract as cattle supplies tighten.  


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