After the Bell: Weather Rally Takes a Pause with Grains Lower and Beans Steady

Posted on 06/18/2019 2:32 PM

Corn: Corn futures settled roughly 5 to 6 cents lower after favoring the downside for much of the session. The market finished well off its lows for the day. After pushing futures up the past five days, corn bulls took a breather today following the release of a generally as expected crop progress and condition update yesterday. USDA reported 8% of producers’ intended corn planting had yet to be completed as of mid-June, which adds to talk of lower planted and harvested acres. But just how low those acres will go is anyone’s guess. And that’s not even getting into discussions on where yields will fall. Late planting dates, relatively low crop condition ratings and recent cool, wet weather means there is already a lot of discussion about yield drag. The bottom line is uncertainty is high, and that has pushed prices sharply higher over the past month.

Soybeans:  Soybean futures ended slightly higher but down from early highs. July rose ¾ cent to $9 13 ½ and November rose ¾ cent to $9.40 ¼. Soybean meal fell $2-plus while soybean oil rose 15 to 19 points. There remains great uncertainty over U.S. soybean seed and yield prospects which should keep a firm tone under the market. It looks wet this week and more planting delays before slightly drier and warmer weather returns to much of the central U.S. next week. Soybean planting was 77% done as of Sunday across the 18 major producing states, slightly below trade estimates and 93% on average. There is plenty of talk about total acres falling from the 84.6 million projected in the March USDA intentions report. The markets also gained after President Donald Trump tweeted that he had a very good telephone conversation with President Xi Jinping of China this morning. Trump said the two will be having an extended meeting at next week at the G-20 meetings in Japan.

Wheat: Winter wheat futures sold off today and finished near their daily lows, down 7 1/2 to 8 1/2  in SRW and off around 11 cents in the HRW contracts. Spring wheat closed 7 to 8 cents lower. Some profit taking from recent gains, especially from the short-term futures traders, was featured in wheat today. July SRW futures hit a six-month high on Monday.The latest USDA crop progress reports on Monday afternoon showed 64% of the 2019 U.S. winter wheat crop is rated in either “good” or “excellent” condition as of June 16. This was unchanged from the previous week and was slightly better than expected. That was a negative for futures today. However, the portion of the 2019 U.S. spring wheat crop rated in either “good” or “excellent” condition slipped 4 percentage points in the week ended Sunday to 77%. The greatest declines were in Montana and Washington while condition ratings improved 4% in Minnesota.

Cotton: July cotton futures closed down 20 points today, but the December contract gained 46 points. A strong rally in the U.S. stock market and crude oil prices today aided the cotton market bulls. However, a rally in the U.S. dollar index to a two-week high today offset some of the outside-market bullishness. Friendly for the cotton market today was a tweet by President Trump saying he had spoken with Chinese President Xi Jinping and that the two leaders’ teams would restart trade talks next week, including a meeting between Xi and Trump at the G20 summit in Japan later this month. However, given the shifting nature of the tenor of the U.S.-China trade dispute, cotton traders won’t get too bulled up over Trump’s comment. USDA late Monday reported U.S. cotton planting progress increased by 14%, to 89% last week, but that's still 5% below the five-year average for this time of year.

Hogs: Hog futures closed mixed to mostly lower today. August futures fell 55 cents to close at $81.70 with the December contract rising 32.5 cents at $75.60. It was a disappointing close in the front hog futures after wholesale pork cutout values jumped $1.64 on strong midday sales. The bears were ready to jump on the rally this morning amid record slaughters. USDA estimates the kill the first two days of this week is up 84,000 head from a year ago and slightly higher than a week ago. Hog traders remain skeptical of any China trade deal despite President Donald Trump tweeting this morning that he had a good conversation with China President Xi Jinping and will be meeting with him at the G20 meetings in Japan at the end of the month. Rising Chinese pork prices will eventually lead to more U.S. pork sales, but it may be later than sooner.  

Cattle: Live cattle futures finished narrowly mixed with prices ranging from 7 1/2 cents lower to 75 cents higher through the December contract. Feeder cattle posted gains of 32 1/2 to 65 cents through the November contract. Feeder cattle futures were supported by weakness in the corn market today. Unless corn futures break significantly, however, the upside in feeder cattle is limited to corrective buying, especially with futures trading well above the cash index. Buying in live cattle futures was even more restricted as traders wait on cash cattle trade to develop. With USDA’s Cattle on Feed Report out Friday afternoon, there’s a strong possibility cash cattle trade won’t come until after that data is released. Therefore, a couple more days of light and choppy trade seem likely. Until traders have a fundamental reason to be active buyers, the upside will continue to be limited to light corrective buying.  

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