After the Bell: Consolidation Trade Continues

Posted on 08/21/2019 3:47 PM

Corn: December corn closed up 1 1/2 cents at $3.70 1/4. Prices hit another three-month low early on today, but tepid short covering helped prices finish in the black. USDA today announced a 328,000 MT corn sale to Mexico for 2019-20. Another positive on the demand front is reports President Trump is considering rescinding the 31 small refinery exemptions (SREs) for the 2018 Renewable Fuel Standard compliance year. Ethanol production slipped 22,000 barrels per day (bpd) the week ending Aug. 16, to 1.02 million bpd. But stocks also dropped 516,000 barrels to 23.37 million barrels. Scouts on the Pro Farmer Midwest Crop Tour on Tuesday measured corn yield potential of 161.5 bu. per acre for Indiana, an 8.1% decline from the three-year average. But yield potential was up 2.6% from the three-year average in Nebraska, where samples generated an average yield of 172.6 bu. per acre.

Soybeans: November soybeans closed up 4 3/4 cents at $8.73 today. Meal prices gained slightly less than $1.00 in the nearbys, while September bean oil gained 31 points. Crop Tour scouts on Tuesday found soybean pod counts in Indiana down a dramatic 21.3% from the three-year average at 923.9 pods in a 3'x3' square. But Nebraska pod counts of 1,210.8 were up 3.3% from year-ago. Rains have fallen this week across the Corn Belt and more showers are possible in western areas of the Midwest today. That will keep a lid on rally potential in the futures market. The National Weather Service forecast for the Aug. 26-30 is cool and wet. Soybean traders will closely examine Thursday morning’s weekly USDA export sales report, especially to see if any purchases are coming from China.

Wheat: December SRW futures gained 1 1/2 cents to $4.68 today, while December HRW prices lost 1 1/2 cents to $4.00 1/2. The corn market’s recent downdraft continues to keep buyers also scarce in the wheat markets. Spring wheat harvest is underway and with that comes hedge pressure. The wheat market will also be keeping an eye on trade talks between Japan and the U.S. the next two days as more Japanese wheat buys may be a component of any deal.

Cotton: December cotton futures gained 80 points to close at 59.94 cents today on more short covering. More upbeat trader and investor attitudes around the globe so far this week, evidenced by solid rebounds in world stock markets, are also a positive for the cotton market, on ideas of increased consumer demand. Traders on Thursday morning will closely examine what is usually the most important data point of the week for the cotton market: the weekly USDA export sales report.

Cattle: August live cattle futures closed up 87 ½ cents at $102.675. October live cattle gained 22 ½ cents to settle at $100.225. November feeder cattle futures closed up $0.925 at $134.40. Short covering was featured again today. Beef packer profit margins have surged $439.85 a head, according to the latest update. That’s giving plants plenty of incentive to keep kill lines as full as possible. USDA data shows that slaughter last week, in the wake of the Aug. 9 Tyson fire in Kansas, was actually up 9,000 head from the week prior. Clearly, the lost capacity was diverted to other plants. Still, some are questioning the sustainability of the aggressive slaughter pace. Boxed beef prices edged higher today, but movement was light.

Hogs: October lean hog futures lost $1.675 to $63.30 today, while December futures fell $1.50 to $62.675. Bearish charts are keeping the technical sellers in control of the futures market. The hog market needs a dose of bullish fundamental news. The market will get the weekly USDA export sales report Thursday morning and then another Cold Storage update later in the day. We expect the Cold Storage report to show a slightly larger month-to-month slide in stocks to 600 million lbs. as of July 31 as the May to June price breakdown made pork a bargain. The pork cutout value dropped $2.67 today.  

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