After the Bell: Smaller Corn Supply Cuts Drag Grains Markets Low, Soy Struggles Despite Bullish Data

Posted on 10/10/2019 3:20 PM

Corn: Corn futures finished near their daily lows with losses of 12 1/4 to 14 cents through the July 2020 contract. December 2020 futures dropped only 3 3/4 cents. The corn market had a sharp negative reaction to USDA’s October crop reports. USDA cut the size of the 2019 corn crop 20 million bu. from last month, whereas the average pre-report trade estimate showed a 115-million-bu. cut. But it was the 2019-20 corn ending stocks projection that was 145 million bu. higher than expected that triggered to bulk of the negative price reaction. Instead of ending stocks of sub-1.8 billion bu. that traders were expecting, projected new-crop carryover was above 1.9 billion bushels. USDA’s objective yield data showed a slight increase in implied ear weight and a slight reduction in ear counts from last month. Given that only 29% of the corn crop was mature when USDA collected its October objective yield samples, we expect ear weights to decline and pull the national average yield down in future months, especially given what looks to be the end of the growing season over a large portion of the western Corn Belt and possibly some of the eastern Corn Belt from the oncoming storm.

Soybeans:  November soybeans closed down 1/4 cent at $9.23 1/2 after hitting an 11-week high early on today. December soybean meal closed down $1.90 at $307.80 and December bean oil finished up 7 points at 29.78 cents. The soybean market got a friendly monthly USDA supply and demand report today, but initial gains after the report was released could not be held as the corn and wheat futures markets sold off and closed with solid losses. USDA’s latest U.S. soybean crop estimate of 3.550 billion bu. is down 83 million bu. from September and 33 million bu. lower than the average pre-report trade estimate. USDA lowered its national average yield estimate by 1 bu. to 46.9 bu. per acre. It cut harvested acreage by 240,000 from last month to 75.626 million acres.News reports President Donald Trump will meet with Chinese Vice Premier Liu He on Friday to discuss the ongoing U.S.-China trade war were also deemed bullish. Trump said today would be “a big day of negotiations with China.” Liu told Chinese state-run media Xinhua that China carries “great sincerity” for the talks this week. The Financial Times reported Wednesday China will offer to boost annual purchases of U.S. soybeans to 30 million metric tons (MMT) from 20 MMT currently.

Wheat: Wheat futures enjoyed gains this morning, but the markets turned down after the release of USDA’s reports. SRW wheat settled 6 ¼ to 7 ¼ cents lower; HRW wheat finished 9 to 10 cents lower; and HRS wheat futures posted losses around 7 cents. Wheat futures enjoyed choppy to higher trade heading into USDA’s reports, but the market softened following the release as USDA raised domestic 2018-19 and 2019-20 carryover; the market had expected little change to 2019-20 stocks. USDA’s smaller-than-expected cut to the U.S. corn crop also weighed on the wheat complex. Wheat has very much taken its cue from the corn market in recent weeks and today was no exception. But at least for now, the market’s uptrend remains in effect. A winter storm is moving into the Upper Midwest, with freezing temperatures expected as far south as Texas. That will likely cause damage to winter wheat that has germinated and could put the nail in the coffin for spring wheat yet to be harvested in Montana, North Dakota and Minnesota. Weather concerns are also present in South America. The Buenos Aires Grains Exchange cut 1.2 MMT from its Argentine production forecast today, citing dry weather, frost and hailstorms.

Cotton:  December cotton futures closed down 67 points at 61.42 cents today, and near the session low. The monthly USDA supply and demand report was a bit bearish, showing U.S. cotton production forecast at 21.705 million bales. The average trade guess was at 21.690 million bales. USDA's cotton production forecast in the September report was 21.862 million bales. U.S. cotton carryover was forecast at 4.85 million bales for 2018-19, unchanged from September's report; and at 7.0 million bales for 2019-20, down from 7.2 million bales in September. While USDA lowered U.S. ending stocks based on lower U.S. production, some traders were looking for a larger decline. The real story in today’s report is India. USDA increased Indian production from 29.5 million bales to 30.5 million, to increase India's carryout to 13.38 million. Traders are now expecting the November WASDE report to increase Indian production another 750,000 bales. The slow pace of U.S. cotton exports combined with larger Indian carryout stocks has traders concerned if the U.S. 16.5 million-bale export number can be achieved. Weekly USDA export sales totaled 188,800 running bales (RB) for the 2019-20 marketing year, which were up 6% from the previous week and up 53% from the four-week average. There were 17,900 RB shipped to China in the latest reporting week. Although net cotton sales were good, the weekly cotton export shipments for this week continued to be disappointing. 

Hogs: Hog futures finished low-range with losses of 5 cents to $1 today. For the week ended Oct. 3, China bought 18,800 MT of pork for 2019 shipment and 123,400 MT for next year. That equates to a combined 313.4 million lbs. of pork sales to China during the past week. The Chinese purchases were the second-highest weekly total ever for all countries, behind only the week ended July 31, 2014, which included “significant late reported sales.” But the hog market was unable to uncover sustained buying, despite huge weekly export sales to China, suggesting the news was already “in” the market. Even if traders factored in the huge sales ahead of time, we don’t think current premiums are enough to account for all of the Chinese demand. China’s hog numbers have been sharply reduced and Chinese buyers will continue to actively buy U.S. pork.  Multiple packers have converted plants and kill lines to carcasses only, presumably to ship more product to China. 

Cattle:  Live and feeder cattle futures closed mixed but in the upper half of the daily price range. December cattle rose 25 cents to $111.425 and November feeders fell 12.5 cents to $144.125. Cattle started lower as a major winter storm barreled through the northern U.S. today as weekly exports were a bearish surprise. Early selling pressure in the fed cattle pit came after USDA reported net beef sales reduction of 29,100 MT last week, all as of a result of Hong Kong canceling 36,000 MT. While robust domestic beef demand has more than compensated for the loss of exports and boxed beef values have exceeded year ago levels, the export market needs to show some improvement that has been expected for the past few months. The market is looking for another gain in cash cattle this week with little action reported the first two days of the week. What trade has taken place has been at higher prices. USDA did release carcass weight data today and steer weights seasonally rose 2 pounds to 898 pounds a new high for 2019 though still 2 pounds below a year ago. The actual fed slaughter that week was 515,000 head, down 4,000 from a year ago for the last week in September. Thanks to heavy Saturday slaughter schedules, the industry continues to slaughter cattle in a timely fashion, despite the temporary loss of Tyson plant in Kansas.

Add new comment