AFter the Bell: Corn, Soy Rebound on Bargain Buying Amid Cool Forecasts

Posted on 08/28/2019 3:04 PM

Corn: Corn futures faced pressure early in the session that took prices near contract-low support. But the market uncovered some bargain buying that helped futures to finish 3 to 5 ¾ cents higher, with the front-month leading gains. An early test of contract-low support triggered some bargain buying. But outside of that, buying interest is limited. This week’s uptick in crop condition ratings is keeping the market pretty unconcerned about the condition of the U.S. corn crop, despite its immaturity. Temperatures have been cool to close out August, which is not what the crop needs. But the market is showing it is unlikely to build weather premium back into prices until there’s a real frost/freeze threat. News on the demand front is also lackluster. The Trump administration is not expected to reallocate waived blending obligations, much to the chagrin of the U.S. ethanol and corn sector. Meanwhile, the U.S./China trade war wages on. And the market is increasingly looking to the 2020 growing season and forecasts for higher corn plantings.  

Soybeans: Soybean futures firmed late, ending high-range with gains of 5 to 6 cents. November beans settled up 6 1/2 cents at $8.65 3/4. Meal futures posted gains of $2-plus, while soyoil firmed 10 points in the most actively traded contracts. Forecasts calling for recent cool weather to continue into next week were enough to encourage traders to cover some short positions into the close today. However, the true test will come overnight and during tomorrow’s session. Active follow-through buying would suggest traders may be serious about lightening their short stance. But a lack of follow-through buying would suggest today’s late recovery was nothing more than a modest correction. Weather will be the fundamental focal point. USDA’s crop progress data Monday afternoon showed 6% (4.6 million acres) of soybeans were not yet blooming and 21% (16.1 million acres) were not setting pods as of Aug. 25. That’s a lot of acres that would be at risk of an early or even normal end to the growing season. Traders will pay extra attention to weather once the calendar flips to September.  

Wheat: Wheat closed lower with spring wheat leading on the downside and corn’s rally only slowing the descent. December SRW wheat futures fell 1 cent to $4.75 3/4 while December HRW fell ½ cent to $4.4 ½. Spring wheat futures were down 4 to 5 ¼ cents. Wheat continues to struggle to build a bullish story with global supplies burdensome, limiting demand for U.S. varieties. Ukrainian grain exports from seaports during the week of Aug. 17-23 remained at a high level of around 1.4 MMT, preliminary data from APK-Inform consultancy showed on Tuesday. The Ukraine ag ministry has proposed the government allow its exporters to ship out 19 MMT of wheat this crop year, up 3 MMTs from last year. The increase would mute any fall in Russian 19-20 wheat exports due to tightening inventories.Canadian wheat production is expected to decline 2.9% from a year earlier to 31.3 MMT in 2019, due to a 1.1% decline in harvested area. A Reuters survey of grain analysts had pegged the Canada all wheat figure at 32.3 MMT, on average. The drop in wheat production is largely attributable to lower winter wheat and durum wheat production, due to fewer planted and harvested acres in 2019. Conversely, spring wheat area and production are both expected to increase.

Cotton: December cotton futures closed up 81 points at 58.73 cents. Short covering was featured in the futures market today as the cotton market has been beaten down far enough in recent weeks. There may have been some buying interest in the futures market on ideas Hurricane Dorian, now bearing down on the U.S. mainland, could damage some of the cotton crop in the southeastern U.S.  Gains in the cotton market were limited today by ongoing worries about slowing global economic growth crimping world cotton demand. Cotton traders will continue to monitor and react to world stock markets, as a gauge of global economic health. Thursday's weekly USDA export sales report will be closely scrutinized by the trade. The U.S.-China trade war continues to be an underlying bearish element for the cotton futures market. One of the key obstacles to a breakthrough on trade talks has become President Trump’s credibility, according to Bloomberg, citing Chinese officials familiar with the talks. Trump’s comments over the weekend that China had called looking to restart negotiations are still causing some confusion in Beijing as nobody there seems to have contacted the U.S. negotiators.

Hogs: Futures moved higher after opening lower this morning, with several contracts closing with reversals to the upside. October hogs were up 27.5 cents to $63.50 and December closed 80 cents higher at $63.70. Hog futures rallied on trade hopes, shaking off the rising hog slaughter levels and weakness in fresh pork prices Wednesday. Slaughter today was 32,000 higher than a year ago, or 6.6% higher, but equal with a week ago. Wholesale pork prices slipped 2.26 cents to 71.81 cents a pound, with bellies leading on the downside. 
The market continues to find underlying support from speculation that China may begin to step up pork imports with the national average hog prices rising to 26 yuan per kilogram, more than double where they were in March. That’s equal to about $1.68 a pound live or $2.26 lean carcass equivalent. That’s far above the current U.S. prices and underscores the rising import needs in China. Brazilian food processor BRF SA's chief executive said on Wednesday an outbreak of African swine fever will drive growth of its pork production in Brazil, where the company accounts for 28% of a supply estimated at about 4 million metric tons a year. Thursday’s trade will key off the weekly U.S. pork sales in the week ended Aug. 22 tomorrow morning.

 Cattle: October live cattle futures closed down $0.575 at $99.20 and December futures were off $0.725 at $104.075. November feeder cattle futures closed down $0.80 at $131.80. Follow-through and technically-related selling was featured today as live and feeder cattle futures remain in price downtrends on the daily charts. Selling interest was somewhat limited by still-strong packer demand and near record profit margins. Margins remain at more than $400 per head, according to September tends to be a seasonally weak period for the beef and cattle markets. But our view is that after the break in both CME futures and western Plains cash markets, the trend is likely to be higher in the coming months.   

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