After the Bell: Wheat Leads Lower on Weather Shifts, Trade Concerns

Posted on 06/05/2019 3:23 PM

Corn:  July corn futures fell 10 ½ cents to close at $4.14 ¾, while December futures dropped 10 ½ cents to $4.33 ½. Corn fell sharply lower on forecasts for drier weather, increasing perceptions that farmers will make one final run at trying to plant more acres. Funds were active sellers Wednesday and probably now own a net-short position again after exiting the record short the past month as prices surged. IEG Vantage, formally Informa Economics, projected corn acres at 84.9 million, the yield 174.0 bushels and production at 13.6 billion bu. USDA said last month that production would rise to a little more than 15 billion bu. IEG also forecast total U.S. crops that will claim prevent planting will rise to a record 11.9 million acres. Yet, corn could only muster a small intra-day rally before heading back lower into the close. Meanwhile on the trade war front,  the first round of possible retaliatory duties published by Mexico against the U.S. did not include corn, and Republican Senators were making noises this week like they would legislate to stop the proposed Trump administration duties next week, should they be put on.  The trade tensions with Mexico and China continue to be a drag on rallies despite the smaller U.S. crop potential.Don’t expected much help from the weekly export sales report on Thursday morning after recent quiet tenders.  

Soybeans: Soybean futures faced pressure for most of the day and the market settled low-range and down 10 to 12 ½ cents through the March contract. Soymeal posted heavy losses in excess of $3.30, while soyoil futures settled 26 to 28 points lower on the day. Soybean futures have taken a breather from recent strong gains, which is not all that concerning so long as bulls return within the next week or so. Soybean planting is historically slow, but weather updates were a bit warmer and drier today and producers should see a four- to five-day window of dry, warm weather to push ahead planting near-term. Soybeans have a longer planting window than corn, but the fact that we’re already into June and 61% of the crop had yet to be planted as of June 2 points to a shortened growing season and rising odds for reduced yields. On the other hand, slow corn planting could shift more acres to soybeans. Today, IEG Vantage projected 85 million acres would be seeded to soybeans this season, a 420,000-acre increase from USDA’s March projection, according to Reuters.  

Wheat:  Soft red winter wheat futures lost around 15 cents today, while the hard red winter futures were down around 21 cents. Prices closed near their daily lows. Spring wheat futures were down around 13 cents. The strong selling pressure continued in the wheat futures market today, including some chart-based selling by short-term traders, after prices early Tuesday scored nearly four-month highs. Despite fears heavy rains could threaten U.S. wheat, the USDA this week gave a more positive picture of U.S. crops in its weekly reports and that remains the main negative factor at mid-week, ahead of the next update on U.S. production on June 11. USDA said 64% of U.S. winter wheat was in good-to-excellent condition, up from 61% last week and expectations of 59%.

Cotton:  July cotton futures fell 23 points to close at 68.74 cents, while December futures fell 39 points to 66.81 cents. Cotton prices tried to rally but ran into overhead selling and drifted lower into the close. The markets gained light support from the rebound in U.S. stock values but the sharp drop in crude oil and grain prices increased selling across the commodity world today, including cotton.
Rains forecasts for parts of the Delta and Southeast should help to reduce stress from several weeks of hot, dry weather. Ongoing trade wars and threats of new U.S. tariffs on China and Mexico, also weighed on prices Wednesday.  Thursday’s weekly USDA export sales and shipments will provide early price trend cue after several weeks of better business.

Hogs: August lean hog futures settled $1.275 lower. The July through December contracts ended 47 1/2 cents to $2.125 higher, with December hogs pacing those gains. June hog futures, which expire at the end of next week, were pressured by falling cash hog prices. The CME lean hog index is projected to decline another 23 cents tomorrow (for June 4). The average national direct cash hog price dropped another 42 cents this morning. With cash prices falling, traders are comfortable with the lead contract slightly below the cash index. Traders will closely monitor weekly pork export sales and shipments to China in tomorrow morning’s update from USDA. Hopes of stronger Chinese demand amid its African swine fever outbreak have been calmed by stalled trade negotiations and indications both sides are prepared for a lengthier battle.  

Cattle:  August live cattle closed up 77 1/2 cents, while October cattle were up 82 1/2 cents. August feeder futures gained $2.20. Short covering was featured in both markets today, following their recent strong selling pressure that pushed prices to contract lows last week. Some bargain buying was also featured in the cattle futures markets today. Still, rallies are likely to remain capped as traders wait to see if there is trade retaliation by Mexico that could include beef and other U.S. farm products. Futures look at least $5 under fair value and maybe as much as $10 below levels we could see with better trade relations.  Traders will closely examine Thursday morning’s weekly USDA export sales report after beef sales showed improvement in recent weeks.


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