Corn: Corn futures firmed 1 to 1 3/4 cents through the July 2020 contract today and finished near weekly highs. For the week, December corn futures strengthened 14 1/2 cents. This week’s price action hints at a potential seasonal low being in place. Next week’s trade will go a long way in determining if that’s the case or if this week’s price recovery was just a mild correction to the bear market. Focus will be on China and weather, but price action in the soybean market might be the biggest factor in how corn trades next week. USDA cut its corn crop and yield estimates less than anticipated this month. We expect further cuts will come next month and the following months. Ear counts have declined each of the past five years from September to final by an average of 0.6%. We expect that to happen again. We also expect ear weights to come down from USDA’s implied figure this month. Corn ear weights increased and ear counts declined from September to final in 2009 and 2013 – the two most recent late years. The yield rose from September to final in 2009 (2.8 bu.; 1.7%) and 2013 (3.5 bu.; 2.3%). But both of those years had extra weeks on the end of the growing season to boost crop size and yields. When the growing season comes to an end will be key in determining final crop size and yield. Barring a disastrous finish to the 2019 growing season, it’s going to take improved demand to sustain any price recovery.
Soybeans: Soybeans closed higher and above their August highs. November beans gained 3 ¼ cents to $8.98 ¾ and up 41 cents for the week after touching the lowest since May to start the week. December meal jumped $8.50 to close at $301.50, but failed to take out the August highs. December soybean oil futures rose 79 points to 29.41 cents. The market focus will be on USDA confirmation of additional Chinese soybean purchases and clarity from China on what tariffs will be lifted. China supports relevant enterprises buying certain amounts of soybeans, pork and other agricultural products from today in accordance with market principles and WTO rules, Xinhua reported Friday, adding that the Customs Tariff Commission of China's State Council would exclude additional tariffs on those items. USDA confirmed the sale of 204,000 metric tons of soybeans to China this morning, confirming some of the 600,000 MT reportedly sold yesterday. Talk today centers on China authorizing purchases by state and private importers of 1 to 3 million MT. For soybeans, additional tariffs of 25% in July 2018 and 5% this month lifted the total duty from 3% to 33%. A 25% tariff on soybeans in July 2018 halted all purchasing by commercial buyers in China, with only state-owned firms buying some of the oilseed when directed by Beijing during a trade truce. This week’s USDA Crop Production Report showed smaller soybean production based on a 20% drop in soybean pod counts, matching the Pro Farmer findings last month. But the implied pod weight is near record high, suggesting downside risks to USDA yield forecasts by the final estimates next January. Actual yield reports the next 60 days will provide further clues to final U.S. yields.
Wheat: December soft red winter wheat closed down 1/4 cent at $4.83 1/2 today. For the week, December SRW gained 19 3/4 cents. December hard red winter wheat closed down 3 3/4 cents at $3.99 3/4 today. For the week, December HRW gained 6 1/2 cents. Some corrective downside price action late this week is not surprising given the overall gains seen in the wheat futures market this week, especially SRW. The market will continue to be supported by worries about South Hemisphere crop potential amid dry weather in Australia, Brazil and Argentina. Look for wheat futures to continue to look to the corn market for direction. Too much rain is raising concerns about U.S. and Canadian spring wheat quality and yields. Demand remains the key to sustained recoveries. World supplies remain record large and the lack of growth in world trade will keep competition for wheat exports intense through the end of the year.
Cotton: December cotton closed up 7 points at 62.28 cents today and did hit a six-week high. Prices also closed at a technically bullish weekly high close today. For the week, December cotton gained an impressive 370 points. The near-term technical posture for the cotton market improved markedly late this week, as prices saw a bullish upside “breakout” from a sideways and choppy trading range at lower levels on the daily bar chart. This suggests some follow-through technical buying will likely occur early next week. Funds will likely continue to cover their once-record short positions. Some early harvest reports from Texas are suggesting yields not a strong as expected. China canceled a few more bales in the past week but further signs of a thawing in U.S.-China trade tensions would provide a solid lift to cotton market sentiment.
Hogs: Futures closed sharply higher to limit up on Friday, extending this week’s rally. October hogs rose $3.30 to $66.465 and up $2.97 for the week. December futures rose the $4.50 daily limit to $68.70 and up $6.225 on the week. December closed with a massive weekly reversal up after making a new contract low at $57.77. Prices exploded to the upside amid thawing U.S.-China trade tensions that point to more Chinese purchases of U.S. pork. China will exempt some agricultural products from additional tariffs on U.S. goods, including pork and soybeans, China's official Xinhua News Agency said Friday, in the latest sign of easing Sino-U.S. tensions before a new round of talks aimed at curbing a trade war. The United States and China have both made conciliatory gestures, with China renewing purchases of U.S. farm goods and U.S. President Donald Trump delaying a tariff increase on certain Chinese goods. China had imposed three rounds of additional tariffs on U.S. pork, including 25% increases in April and July 2018 and a 10% bump this month, raising the total duty from 12% to 72%. A huge shortfall in domestic output has sent Chinese pork prices soaring, which could lead to very large imports. The focus will be on Thursday’s weekly export sales data to gauge Chinese buying urgency.
Cattle: December live cattle futures prices closed down $0.575 at $104.375 today. For the week, December cattle gained $4.625. November feeder cattle futures today gained $0.125 to $134.025. For the week November feeders rose $3.35. The cattle market bulls had a good week, including on the charts. December live cattle futures scored a bullish V-bottom reversal pattern on the daily bar chart, while November feeder cattle futures produced a bullish double-bottom reversal pattern. Look for follow-through buying interest next week, especially as the hog futures market has screamed higher late this week.Cash cattle trade picked up at $99 in the Southern Plains Thursday afternoon, down around $1 from last week but up from sales early this week. Some feedlots will likely hold out for better prices, especially since marketings are current. Tight market-ready cattle supplies suggest the seasonal low in cash cattle is forming. The drop in wholesale prices may reignite grocer and consumer demand in the weeks ahead. Export demand may also begin to improve after the recent lull.