After the Bell: Wheat, Corn, Soybeans Continue to Erode Lower on Export Concerns

Posted on 03/11/2019 2:47 PM

CornFutures finished low-range with losses of 1 1/4 to 2 1/4 cents. Corn futures were pressured by spillover from the wheat and soybean markets today. Fundamental pressure came from disappointing weekly export inspections of just 765,618 MT, which were lower than expected and below normal for this time of year. USDA last week cut its 2018-19 export forecast by 75 million bu. due to diminished price competitiveness for U.S. corn and expectations for stronger South American shipments. South American weather also remains price-negative for the corn market. Favorable weather is expected to continue across Brazil and most of Argentina the next two weeks, as widespread rains are forecast. The lone area of concern is southwestern areas of Argentina, though that’s not a major corn-production region. Unless widespread heat and dryness develop, traders aren’t going to be concerned about South American corn production. Funds have amassed a near-record short position in the corn market, which is unusual ahead of spring, especially given what will be a delayed start to the planting season. Logic says the short side of the market is saturated, which could limit near-term speculative seller interest. But there’s currently no catalyst to spark aggressive short-covering.

Soybeans: Futures closed 5 to 6 cents lower and near session lows. May futures fell 5 ¾ cents to close at $8.90 and November was down 5 cents at $9.25. Soymeal futures also closed in negative territory while soyoil contracts were close to unchanged. Soybean futures fell on Monday as traders shrugged off news of a fresh sale to China and remain focused on the lack of an overall trade deal with the world's largest oilseed importer. USDA’s daily export sales reporting services said this morning that private exporters sold 926,000 metric tons of soybeans to China for delivery this marketing year. On Friday, USDA said China bought 664,000 MT of U.S. soybeans, which confirmed China's first purchase of U.S. supplies since promising to buy an additional 10 MMT as part of trade talks. Also on Monday, USDA said weekly export inspections of soybeans totaled 874,363 MT in the week ended March 7, in line with analysts' forecasts that ranged from 700,000 to 1.050 MT.  China was the destination for 386,581 MT last week, about 44% of the total.China and the U.S. are still working day and night to achieve a trade deal that matches the interests of both sides and the hopes of the world, including eliminating tit-for-tat tariffs, Chinese Vice Commerce Minister Wang Shouwen said Saturday. It is unclear when or where senior negotiators from both sides will next meet. China thought it was getting close to a deal but now realizes that won't be so easy to achieve, a Chinese source familiar with the situation told Reuters. Thus, the agreement will be completed in full before Trump and Xi meet for a photo op at their Trade Summit. This makes the announcement of the Trade Summit more important than the actual pact-signing ceremony.

Wheat: Most nearby winter wheat futures contracts lost around 11 cents today and hit new contract lows, as the blood-letting continues with no solid, early chart clues that the markets are close to a bottom. Spring wheat futures prices were down 2 to 5 cents. Winter wheat opened about steady in overnight trade but it did not take long for new sellers to surface. The specter of burdensome U.S. and world wheat stockpiles, bolstered by last Friday’s USDA monthly supply and demand report that showed larger-than-expected U.S. and wheat supplies, continues to push down wheat futures prices around the globe. Today’s USDA wheat export inspections data for the latest week showed 592,001 MT inspected, which was slightly up from last week and in line with trade expectations. It did include 42,000 MT shipped to China, but the market ignored the positive demand news.  Iraq's state grain board bought 100,000 MT of wheat equally divided between S. and Canadian supplies. Syria's state grain buyer bought 200,000 MT of Black Sea-origin wheat in its latest international purchasing tender as expected. Speculative funds’ short positions in the futures market remain a potential positive if U.S. exports improve. As of last Tuesday, funds were net short 72,449 futures and options in SRW up from 58,567 a week earlier and the most for the date since 2016. Funds were net short a record 44,870 HRW futures and options.

Cotton: Futures ended in the bottom half of today’s range, erasing an early gain. May was down 29 points at 73.20, while December closed up 1 point at 73.51. Futures resumed last week’s retreat amid little fresh news. Funds reduced short positions to 18,301 as of March 5, from 21, 024 futures and options contracts a week earlier, which was the largest bearish bet since May 2007. Some additional short covering emerged in early trading Monday but failed to sustain prices amid little news on the supply and demand front.  Little fresh news to suggest a U.S./China trade deal is close added to the negative undertone Monday. Last Friday, USDA did not make any changes to its U.S. supply and demand forecasts, leaving exports at 15.0 million bales and ending stocks at 4.3 million. However, the export pace is almost 11% below the prior year’s pace and new sales have slowed.  Additionally, the pace of weekly shipments is below the level needed to reach the USDA projection of 15 million bales.

Hogs: April lean hog futures rose $2.225 today and June hogs gained $1.42. Both contracts hit six-week highs today and finished near their daily highs. Rising cash hog and pork product prices are fueling the solid rally in the futures and does suggest a market bottom is in place and that futures prices can trend at least sideways, if not sideways to higher, in the near term. National hog prices rose $1.21 on Friday and Iowa/Minnesota jumped $1.83. Wholesale pork carcass values rose a sharp $3.53 in the noon report today, led by gains mostly across the board and a big jump in belly prices. Movement was 120.56 loads. Hog slaughter last week rose to 2.548 million head, up 5.7% from a year ago, which is may work to limit the upside in futures this week. Hog prices in China climbed to a 14-month high on Monday as African swine fever continues to spread across the country, resulting in the culling of around 1 million pigs. China and the United States are still working day and night to achieve a trade deal that matches the interests of both sides and the hopes of the world. World attitudes on the matter seem more upbeat this week than late last week, which are also supportive to the U.S. hog futures market.

Cattle: Live cattle futures saw some profit-taking after Friday’s strong finish, with futures settling midrange and down 25 to 70 cents. Feeder cattle settled $1.125 to $1.725 lower through the May contract, with farther deferred months posting just slight losses. Live cattle futures faced some profit-taking to start the week after posting contract- to near-contract-highs in most contracts last Friday. But the market’s pronounced uptrend remains intact and both the cash and product market continue to perform well. Cash prices traded at an average of $128.15 last week, essentially unchanged from the week prior, and Friday’s Cattle on Feed Report was right in line with expectations. Low slaughter weights and strong packing margins bode well for cash performance going forward.  Meanwhile, Choice and Select boxed beef values strengthened to start the week, but movement slowed to just 26 loads this morning.

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