After the Bell: Corn, Wheat Gain on Short Covering, Soybeans Slip Lower

Posted on 09/18/2019 2:56 PM

Corn: Futures rebounded from earlier losses and closed near session highs. December corn was up 3 ¼ cents at $3.71 ¼. The market found light support from ongoing short covering activities, partly in response to concern U.S. yields may end up lower than USDA forecast last week. The market also continues to find support from yesterday’s news China’s state stockpiles of corn have dropped from 200 MMT in 2017 to around 56 MMT, according to Wu Tianlong, a researcher with the country’s ag ministry. That’s a possible sign of a structural supply shortage developing to meet China’s feed and fuel needs in the years ahead.  Rains are forecast to increase over the western Corn Belt, with the bulk of the moisture through the weekend falling from Kansas to Michigan, leaving the Delta and the far eastern Midwest still mostly dry.  The early yield reports are variable but leaning slightly disappointing, and these crops were supposed to be better because it was planted early and avoided flooding and excessive wetness. But it is still too early to draw any concrete conclusions.  

Soybeans: November soybeans closed down 5 cents at $8.88 3/4 today. December soybean meal lost $2.40 at $295.40 and December bean oil gained 1 point at 30.00 cents. The soybean market was pressured a bit today as USDA this morning did not announce any new sales to China. In the past three sessions, USDA’s daily reporting services reported China buying 720,000 MT of U.S. soybeans. There has been talk that China would purchase as much as 1 to 3 MMT of U.S. soybeans ahead of the trade negotiations. Deputy-level U.S.-China trade talks are scheduled to start in Washington late this week. Traders are awaiting Thursday morning's weekly USDA export sales report, which is expected to show bean sales of 700,000 to 1.1 million metric tons. Traders will be especially interested to see if China makes more soybean purchases via the daily reporting service.

Wheat: Wheat futures firmed around a nickel in SRW contracts and mostly 6 to 7 cents in HRW and HRS contracts. Wheat futures extended their corrective rebound off the early September low as funds covered more short positions. Fundamental support for today’s price strength was lacking. In fact, wheat firmed in the face of strength in the U.S. dollar, which is a little surprising given the export struggles U.S. wheat faces. While exports are running ahead of last year’s paltry pace so far, there’s still plenty of export competition from the Black Sea region and Europe. Egypt bought 180,000 MT of Russian wheat in a tender today, while Algeria purchased 600,000 MT of what’s likely to be mostly European origin wheat. Weekly export sales tomorrow morning need to push above the top end of the pre-report range of estimates at 600,000 MT to be price supportive.  

Cotton: Cotton futures faced pressure again today. Futures settled low-range and down 58 to 88 points through the July contract. Cotton futures saw some followthrough selling after yesterday’s losses. The market has retreated alongside crude oil futures the past two days as it became more evident the U.S. would be measured in its response to the attack on Saudi Arabia’s oil. Harvest of the U.S. cotton crop is also underway and with that comes related hedge pressure. So far, most contracts have held above the 40-day moving average.  Tomorrow traders will turn their attention to USDA’s weekly export sales update.

Hogs: October lean hog futures closed up $0.825 at $62.925 today. December hogs ended up $0.125 at $67.80. Prices closed near mid-range. Some short covering was featured in the futures market today. Futures buyers reckon the hog market has put in a seasonal bottom and are looking for better demand in the fourth quarter—especially from China. However, without stronger new Chinese U.S. pork purchases at present, the market is awash in market-ready hog supplies. Last week’s slaughter of 2.611 million head was the largest yet this year. China's government is releasing pork from stockpiles to help cool surging prices ahead of Oct. 1 and celebrations of the Communist Party's 70th anniversary in power. However, the 10,000 MT of sales is less than 0.2% of monthly consumption, a sign the Chinese government is trying to slow the record price run than to change supply levels

Cattle: Live and feeder cattle futures closed higher, making new highs for the rally. December cattle rose 85 cents to $106.15 while November feeders gained $1.25 to $136.30.   A firmer tone in the cash market helped October lead gains and support bull spreading in the live cattle futures. A few cattle traded at $101 to $101.25 on the Fed Cattle Exchange today, higher than last week when a top in the south was reported at $100. Regional sales in the north are mostly steady to slightly higher on light volume. Better volume at higher levels is probably needed to support the next leg higher in the futures. Midday wholesale beef prices were lower with Choice down $1.21 and Select down $2.16 today, but sales were very active. Beef demand is set to improve with lower prices after surging following the fire at the Tyson plant in Kansas. Packer margins this morning are estimated near $370 per head, down from over $400 last week. Packer will need to continue to give up margins to buy more cattle and sell more beef in the weeks ahead. The Federal Reserve cut interest rates ¼ point today to sustain economic growth and said they expect strong job market to continue, both bullish views for beef demand.

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