After the Bell | July 7, 2021
Corn: July futures slid 3 1/2 cents to $6.52 1/2 a bushel, while new-crop December tumbled 8 3/4 cents to $5.31. The wet and relatively cool conditions sweeping across the Corn Belt this week maintained downward pressure upon corn futures. The spring crop market rally was largely driven by worries that Corn Belt dryness would extend into the July pollination period, so having much more favorable conditions dominate the region at this time has price under pressure. Tuesday’s 6.9% decline was the worst post-Independence Day drop on record. But the sheer size of the breakdown may have caused second thoughts over the outlook, especially after the weekly Crop Progress report indicated no change in USDA’s good-to-excellent reading (at 64%) from the week prior despite the improved weather that prevailed last week.
Soybeans: July soybean futures rose 22 3/4 cents to $13.86 1/2 a bushel and November soybeans rose 22 1/4 cents to $13.27 1/4. August soybean meal futures rose $2.10 to $358.70 per ton and August soyoil rose 66 points to 61.60 cents per pound. The soybean market diverged from corn in the wake of slightly weaker-than-expected USDA crop ratings and hopes for fresh export business. USDA yesterday reported 59% of the U.S. soybean crop in good-to-excellent condition, down from 60% last week. Analysts expected the rating to hold unchanged. Soybean futures’ recent drop stirred talk that bargain-hunting foreign buyers, possibly China, may emerge, as has been witnessed recently. Otherwise, the Midwest weather outlook for the first half of July remained largely bearish.
Wheat: December SRW wheat closed down 3 cents at $6.30 ½, after hitting a three-month low yesterday. December HRW wheat closed 1/4 cent at $5.95 3/4 after hitting another three-month low. September spring wheat futures rose 14 3/4 cents to $8.08. September and December spring wheat futures helped to limit selling interest in the winter wheat futures markets today. However, the winter wheat contracts could get no traction as corn futures prices continued slumping in the wake of December futures’ 40-cent daily limit drop yesterday. Spring wheat futures remain supported by deteriorating USDA crop condition ratings. USDA rated the U.S. spring wheat crop 16% “good” to “excellent,” down from 20% the previous week and about three percentage points worse than expected.
Cotton: December cotton closed up 23 points at 87.63 cents, near four-month highs reached yesterday. Cotton market bulls showed some resilience in the face of sharp losses in the grain and crude oil markets. The U.S. stock market continues climbing, keeping cotton market bulls energized, on ideas of stronger demand heading into the fall. West Texas recently received rain, and scattered showers are forecast for the region today and Thursday. Meantime, Tropical Storm Elsa was expected to bring more rain to already waterlogged areas in Georgia. However, most of the cotton produced in the southeastern U.S. will be spared from any serious production loss, as long as the storm moves as expected, said World Weather. We advise cotton hedgers and cash-only marketers to sell the final 10% of 2020-crop to get to 100% priced in the cash market. We also advise all cotton producers sell another 10% of expected 2021-crop for harvest delivery to get to 50% forward-priced.
Hogs: Lean hog futures finished 77 1/2 cents and $1.95 lower in the July and August contracts, respectively. Summer-month hog futures were unable to build on yesterday’s gains as funds reduced long positions. As of June 29, managed money accounts were net long 64,907 futures contracts, so there is risk of additional liquidation pressure if funds decide to further trim their long exposure. July hogs will track the cash index ahead of the July 15 contract expiration. After today’s losses, the front-month contract is about $1 below where the cash index will be quoted tomorrow (as of June 6). August hogs hold nearly a $10 discount to the cash index, which has fallen around $12.50 since the mid-June peak. The national direct cash hog price was $1.26 lower this morning, though pork cutout values firmed.
Cattle: Concerns about potential seasonal weakness seemed to send cattle futures tumbling, with the nearby August contract losing $1.80 to $120.60 per hundredweight and October dropping $1.45 to $126.70. August feeders tumbled $1.625 to $159. News that fed steers had averaged $122.37 at the five-area markets yesterday, down from $123.89 last week, seemed to undercut futures. The drop came despite a $1.24 bounce in Choice beef prices to $286.68 yesterday, as well as a $1.08 gain early today. Traders may be anticipating traditional midsummer weakness in cash and wholesale prices due to seasonally large supplies and “summer doldrums” in consumer beef demand. The big question for the cattle/beef sector is whether the vigorous consumer buying experienced during spring 2021 persists at elevated levels during the coming weeks.
