After The Bell: Wheat Skids to New Lows, Drags Corn, Soybeans Lower

Posted on 04/16/2019 3:16 PM

Corn: After a quiet start overnight funds piled into new shorts today, pushing prices back down near the contract lows made last week. May futures fell 3 ¾ cents to $3.59 and December dropped  3 ¼ cents to $3.87 ½. There was little new to stir the fundamental news pot today and that encouraged funds, already record net-short, to press the short side of the market, especially with wheat prices tumbling more than 3% today. Funds don’t really care about news unless it is a red headline that suggests something more important is happening.  The lack of more positive news on a China deal in the face of reports that the U.S. is watering down demands, also limited buying interest. The national corn planting progress report Monday showed just 3% was seeded as of April 14, compared with 5% on average. With more showers the next few days, little will get done this week to push the national progress close to the 14% average in next week’s report. The weather models turned a little drier for late April and early May but that was enough to put pressure on prices today. The export story continues to be sluggish but needs to ramp up a bit during the next several months to meet the USDA projections. The good news is livestock profit margins are on the rise, especially for broiler and hog producers, and that could lead to stronger feed demand. Ethanol profit margins are also back in the black but nothing to suggest a surge in production ahead.  

Soybeans: Soybean futures finished with losses of 9 to nearly 11 cents in most contracts. Soymeal futures ended $4.30 to $4.60 lower, while soyoil closed 9 to 10 points lower. Soybean futures lost way more ground today than they gained Monday. Funds, who were short more than 70,000 contracts (more than 350 million bu.) of soybeans as of April 9, added to their aggressive short stance today. While U.S. and Chinese negotiators continue to make progress on trade talks, today’s price action signals traders don’t sense an agreement will be reached anytime soon. Until there’s a trade deal or something else to spook traders out of their aggressive short stance, the upside will remain limited and the downside open for soybean futures. Rising South American crop estimates signal there will be strong export competition even if a trade deal is reached between the U.S. and China. South American Consultant Dr. Michael Cordonnier raised his soybean crop estimates for Brazil and Argentina by 1 MMT each to 116 MMT and 56 MMT, respectively. Other private crop estimates are around these levels.   

Wheat:  Winter wheat futures posted solid losses today, closed near their daily lows and fell around 9 1/2 to 14 1/2 cents. SRW futures hit four-week lows today, while the HRW futures scored new contract lows. Spring wheat futures were down 4 ½ to 5 ¼ cents. The wheat futures markets were pressured by weather forecasts for rains in the U.S. central Plains, Europe and parts of the Black Sea region, which will improve 2019 yield potential in those regions. May and June weather will determine final yields across these areas but right now there are few significant risks. That has the speculative funds looking to add to large short positions. U.S. winter wheat crop ratings are starting out strong. Around 60% of the winter crop is rated "good" and "excellent" as of April 14, unchanged from a week earlier and up from 31% a year ago. Spring wheat planting was reported 2% done this week, compared with 3% a year ago and 13% on average the past five years.  Sluggish U.S. wheat exports remain an anchor on U.S. futures prices, though Taiwan did tender to buy 109,175 MT of milling wheat from the U.S. overnight.

Cotton: Futures regained much of yesterday’s drop and closed near session highs. May futures rose 145 points to 77.94 cents and December gained 99 points to 76.87 cents. Texas rains during the weekend sent prices tumbling Monday. Prices recovered most of yesterday’s declines on underlying export demand. Domestic demand is set to fall to a record low this year, so every Thursday the market will key off the weekly USDA export sales and shipments report. Sales and shipments have been improving the last several weeks and traders are looking for another good week. Cotton planting was reported 7% completed as of April 14. That’s equal to the five-year average and should make good progress this coming week in parts of Texas but may be slow across the South and Southeast.  News that China is going to expand its import quotas of about 3.5 million bales to feed its domestic textile mills continues to provide underlying support. However, there remain hurdles for these mills to qualify for quotas. Also, the U.S. will face increased supply competition from bigger world crops in the year ahead.  

Hogs: Lean hog futures settled split, with May through July futures down 37 ½ cents to $1.175 and deferred months up 22 ½ cents to $1.975. Some far deferred months hit new contract highs today. There was more talk today that any U.S./China trade deal would include big Chinese pork purchases as African swine fever continues to diminish the nation’s protein supply. But sources cited by Reuters say China won’t budge on a U.S. push for it to relax restrictions on the growth hormone ractopamine  Nearby contracts saw some pressure today as they are well ahead of the CME lean hog index that is preliminarily projected at $79.84 for Monday. While the index is still moving higher, the pace of gains has slowed dramatically. Cash hog bids were mixed this morning.  

Cattle: June live cattle futures closed up $1.225, with the August contract ending up $1.15. Both contracts finished near their daily highs and hit three-week highs today. Meantime, feeder cattle futures were up $0.025 in the May. August feeders hit a contract high and closed up $1.10. Futures are supported this week by rising wholesale beef prices and expectations for steady-to-higher cash cattle trade this week. Choice beef prices at midday rose by another $1.12 to the highest level since last May. Select was up another 33 cents to the highest point since June of 2017. Cash cattle traded at an average price of $126.19 last week, according to USDA. Given strong and rising beef prices and the forecast for more rain across the Plains in the weeks ahead, we would not be surprised to see cash prices rise this week. Grocers are looking to stock their meat cases with beef for early May and the grilling season. USDA will release it April 1 Cattle-on-Feed Report Thursday after the close, and the futures rally ahead of that report is a positive sign.     

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