After the Bell | November 26, 2021

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Corn: December corn futures rose 7 cents to $5.86 3/4, the contract’s highest settlement since $5.89 on July 1. Corn futures closed a shortened trading session near a five-month high after USDA’s weekly export sales came out stronger than expected. U.S. exporters sold 1.429 MMT of corn during the week ended Nov. 18, up 58% from the previous week, up 40% from the average for the previous four weeks and a marketing year high. Expectations ranged from 750,000 MT to 1.4 MMT. Robust demand from U.S. ethanol producers, if sustained, may buoy corn futures through the rest of 2021. Earlier this week, the Energy Information Administration reported weekly ethanol production at an average of 1.079 million barrels per day (bpd) for the week ended Nov. 19, up 19,000 barrels, or 1.8%, from the previous week. Average ethanol production over the previous four weeks averaged 1.078 bpd, down slightly from a four-year high earlier in November. With the U.S. harvest nearly complete, trade focus is shifting to exports and South America weather, which has been mostly favorable for early crop development.

Soybeans: January soybean futures fell 13 3/4 cents to $12.52 3/4, the lowest close in over a week. January soybean meal fell $1.50 to $394.40 per ton and January soybean oil fell 182 points to 58.88 cents per pound. Soybeans took pressure from losses in wheat and a plunge in crude oil futures, which sank to two-month lows amid concern over a new Covid variant. Early today, USDA reported U.S. exporters sold 1.565 MMT of soybeans during the week of Nov. 18, up 13% from both the previous week and the prior four-week average. China was a prominent buyer at 882,500 MT, including 461,000 MT switched from “unknown destinations” and decreases of 24,500 MT. Growing conditions in South America’s soybean regions remain mostly favorable. If that continues to in coming weeks, expectations will build that Brazil will harvest a record soybean crop in 2022. That’s another bearish fundamental presently hanging over the soybean market and will likely continue to do so in the coming weeks.

Wheat: March SRW wheat fell 10 cents to $8.40 1/4. March HRW futures fell 8 cents to $8.69. March spring wheat rose 3 1/2 cents to $10.48 1/2. Wheat fell in a second day of profit-taking around the Thanksgiving holiday despite stronger than expected export sales. USDA reported net U.S. wheat sales of 567,500 MT for 2021-22 were up 42% from the previous week and up 70% from the average for the previous four weeks. Price action over the next few weeks will be key in determining if the market has posted a top or the pre-holiday break was just a correction in a longer-term bull market. Given that funds have actively extended their net long wheat positions recently, there’s some risk that an extended price pullback could develop. Recent price gains stemmed from heavy late-season rains in Australia that are hampering crop quality. The country will have plenty of wheat this year, as the crop is expected to be the second largest ever, but there will be far more feed quality supplies and less milling quality than normal.

Cotton: December futures tumbled 378 points to 116.60 cents per pound and most-active March futures sank 400 points to 111.78 cents, its lowest close since late October. Cotton futures fell sharply as the discovery of a new coronavirus variant dampened market sentiment and stoked concerns over demand for the natural fiber, sparking a broad-based sell-off in crude oil and other commodities. Also today, USDA reported net weekly U.S. export sales totaling 196,900 running bales, up 44% from the previous week and up 3% from the prior four-week average, with China being the top buyer. Traders will look to the Dec. 9 USDA Crop Production and Supply and Demand reports for any adjustments to U.S. cotton yield and production totals.

Cattle: February live cattle rose 32.5 cents to $141.50, a lifetime high close for the contract, while December live cattle rose 20 cents to $138.10, the highest closing price for a nearby contract since April 2017. January feeder cattle rose 22.5 cents to $167.15. A strong cash market continued to lift futures this week. Two major packers reportedly boosted their bids for fed cattle to $138 earlier this week, with some talk of bids having reached $139 to $140. Most feedyard managers were reportedly passing, since it appears market-ready fed cattle supplies aren’t meeting packer needs. Late Friday, USDA reported live steers in top feedlot areas at an average of $138.13, up over $5.00 from a week ago.

We expect heavy trading to occur as producers start taking packer bids, which may give packers the ability to hold the line next week, especially since they’ll soon gain access to contracted cattle for December. That might open the door to a short-term futures setback, which would seem even more likely if recent choice-beef cutout stability around $279 fails and wholesale prices turn lower. Choice cutout values rose $1.04 today to $280.15, up from $278.41 at the end of last week.

Hogs: February lean hog futures fell $3.225 to $81.025, a two-week closing low. Futures tumbled amid profit-taking pressure amid light trading, as cash fundamentals remained soft. The latest CME Lean Hog index fell 59 cents to $72.56, the lowest since $72.36 on Feb. 10. Pork cutout values fell $1.00 today to an average of $83.98, down 6.5% from $89.82 at the end of last week and the lowest daily price since early February. Movement was about 201 loads, down from levels earlier in the week. Carcasses on national direct markets today averaged $55.13, up from $54.95 at the end of last week. Slaughter during the holiday-shortened week was an estimated 2.261 million head, down 368,000 from last week.  

There are growing ideas the cash hog market may establish an early seasonal low. Typically, cash hog prices in recent years hit yearly lows between Christmas and New Year’s Day. Surprisingly large pork production this year suggests a repeat of that seasonal phenomenon. Recent wholesale pork weakness combined with high wholesale beef prices should prompt improved pork demand in the coming weeks.


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