After the Bell: Mixed Finish But Up From Session Lows Ahead of USDA Report

Posted on 09/09/2019 3:18 PM

Corn: December corn futures finished 1 1/4 cents lower at $3.54/ 1/4 today and hit another contract low. Futures found little buying support today from USDA’s daily export sales reporting service announcing private exporters sold 651,670 metric tons (MT) of corn for delivery to Mexico.  Corn inspected for exports in the week ended Sept. 5 rose to 590,013 MT from 357,784 MT a week earlier but were down from 783,495 MT a year earlier. Corn harvest is starting to pick up in the South, with yields reported good in areas that missed out on heavy spring rains. Futures trade Tuesday and Wednesday is likely to see positioning ahead of the USDA Crop Production Report on Thursday morning. The U.S. corn crop may fall 229 million bushels from the August forecast, according to a Reuters survey. It may take until the October and November updates to get a better handle on the impact of this year’s adverse weather on average U.S. yields. USDA is expected to rate 58% of the U.S. corn crop in good to excellent condition in its weekly crop progress report, unchanged from the previous week, according to a survey by Reuters. Weather this week is a little too wet in some areas of the Dakotas, Minnesota and Wisconsin, and still too dry from parts of Iowa to Ohio. Temperatures seen average to above the next two weeks, easing fears of any early hard freeze.

Soybeans:  Soybeans fell to new lows for the month and closed leaning higher. November beans closed unchanged at $8.57 ¾ while December meal closed up $1 after falling to the lowest since May. The market found some underlying support from slightly better demand and general uncertainty about the size of the U.S. crop before the USDA Crop Production Report on Thursday morning.  However, rallies remain capped by warmer weather forecasts the next two weeks, helping soybeans fill pods with larger beans with most areas sitting with adequate soil moisture supplies. China soybean imports in August were highest in 15 months. China bought 9.48 million tons of soybeans last month, the most since May 2018, according to official customs data. It was up from 8.64 million tons in July and 9.15 million tons in August 2018. Imports from Jan.-Aug. fell 9.2% from a year earlier to 56.32 million tons.  Treasury Secretary Steven Mnuchin on Monday said he did not see the threat of a recession as the Trump administration seeks to revive trade negotiations with China, adding that Yi Gang,  the People's Bank of China's governor, would attend the October meetings and the two sides would discuss "currency and currency manipulation."   

WheatWheat futures were mostly higher to sharply higher. December SRW wheat futures rose 11 cents to close at $4.74 ¾ and December HRW gained 5 ¼ cents to $3.98 ½. Spring wheat gained 2 cents to $4.96 ¼. Wheat futures showed initial signs of reaching a seasonal low after opening lower and closing with strong gains. The rally began in Europe where futures formed an outside day up reversal after Saudi Arabia's state grain buyer SAGO bought 780,000 MT of world wheat in an original tender for 595,000 MT, the first from Saudi Arabia to allow wheat offers from the Black Sea region. The wheat offered was from the European Union, the Black Sea region, North America (excluding Canada) and South America, SAGO governor Ahmad A. Al Fares said in a statement. The seller has the freedom to select the origin to be supplied and sales are expected to be mostly sourced from the Black Sea region and Europe.  Increasing worries about lingering dryness in Australia added support. The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) pegged production of the country's crop at 19.2 MMT, down from its previous estimate in June of 21.9 MMT. That’s more than 22% below the 10-year average of 24.7 MMT and confirms a third straight year of lower-than-average production. Dry weather is also stagnating in western areas of Argentina, increasing crop risk if it continues into next month. Traders are looking for tonight’s weekly crop progress report to show spring wheat harvest near 70% completed. Wetter forecasts the next two weeks will lead to some harvest delays and quality losses.  

Cotton: December cotton futures closed up 40 points at 58.98 cents today and nearer the session high. Upbeat trader attitudes in the world marketplace at present are prompting some short covering in the cotton futures market, on hopes of improving worldwide demand. Markets are hoping last Friday’s easing of monetary policy by China’s central bank is the start of a global trend. Expectations are high for Thursday’s decision from the European Central Bank, with a rate cut further into negative territory seen as the minimum that will be announced. Later in September the Federal Reserve is expected to lower its interest rates. Limiting the upside in cotton futures was news over the weekend that Chinese exports unexpectedly contracted in August, amid the nearly 16% plunge in exports to the U.S. Imports fell for a fourth consecutive month. Top White House economic adviser Larry Kudlow said the trade war with China may take a long time to resolve, warning of a prolonged dispute with Beijing that he compared to the Cold War.

HogsHogs closed lower to sharply lower and near the session lows. October closed 90 cents lower at $62.60, while December was down $2.525 at 59.95. Futures followed the cash markets lower Monday as Iowa/Minnesota prices were down $1.65 this morning, extending last week’s declines. Wholesale pork cutout values fell 77 cents despite gains in hams and bellies. Sales were moderate to slow at midday. Slaughter was estimated at 485,000 head today, up from 458,000 head a year earlier. The Brazil farm trade secretary says his government is working to get approval for new meat plants to export to China beyond the 25 already approved to export chicken, pork, beef and donkey meat. U.S. July export data showed record pork shipments for the month and second highest ever to China. That’s another signal that Chinese imports could rachet higher amid falling slaughter supplies amid the African swine fever outbreak. But Chinese tariffs need to be lifted before substantially higher exports develop. China's Guangdong province said it will release 3,150 MT of frozen pork from reserves during the upcoming holidays, part of a campaign to secure supplies of the country's favorite meat. Guangdong relies on supplies from other provinces.    

Cattle: October live cattle closed down $0.675 at $94.20 and December futures fell $0.575 to $99.175. November feeder cattle futures were down $1.575 at $128.80. All three set new contract lows today.  The cattle futures saw good follow-through selling after the sharp losses late last week. Chart-based sellers in the futures markets are now piling on, but they usually overdo it on the downside in such situations. Feed lots are current and seasonally cattle prices should strengthen through fall. But the cattle market is dealing with supply concerns, especially with the Holcomb, Kansas Tyson plant shuttered indefinitely. That may hold back buying in futures and any seasonal advance. We still expect cattle futures to rally once the current flush is complete. Wholesale beef prices were mixed at noon today, with Choice down 73 cents and Select up $1.74, on light movement of 34 loads. Last week’s cattle slaughter was an estimated 565,000 head, versus 571,192 head last year, with Friday’s kill 115,000 head and Saturday’s kill 101,000 head. This was the first Saturday kill over 100,000 head since June 2 last year with packer margins over $400 per head.

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