After the Bell: Corn Rebounds on Harvest Delays; Soy slips on China Deal Worries

Posted on 10/30/2019 2:47 PM

Corn: Corn futures faced early pressure overnight, but the market strengthened during the day trading session and settled high-range with fractional to 4 ½ cent gains. Nearby contracts led gains. Corn harvest in the Midwest has been slow-going, with just 41% of the crop picked as of Sunday. Snow for much of the Midwest is keeping efforts slow and freezing temperatures mid-month caused yield losses in areas where planting was delayed by excess rain and flooding. USDA will weigh in on yields and production next week, though again, much is still yet to be determined given record-setting delays. Firm basis speaks to tight near-term supplies of the grain. On the other hand, light demand for the grain has limited the corn market’s upside, as export demand and ethanol demand have both been disappointing. Today’s weekly update on ethanol production was a bit friendlier than in week’s past, however. Ethanol production climbed 8,000 barrels per day, pushing production to 1.004 million bpd the week ending Oct. 25. This was the first time in more than a month production topped the 1 million bpd mark. Ethanol stocks also fell 265,000 barrels to 21.1 million barrels. Tomorrow USDA will provide an update on corn exports.

Soybeans:  Futures closed lower and in the bottom half of the session range after touching a new 15-session low. November beans were down 2 ¾ cents to $9.16. Meal futures fell 50 to 80 cents today and oil declined 2 to 4 points. While soybean harvest remains delayed, there are some beans moving into the pipeline to cap recent basis gains. Next week looks drier but cold and growers will try to finish beans before moving on to corn. South America weather leans negative from some rain this week and additional showers forecast for next week. Next week’s rains in Brazil will need to verify to ease recent dryness concerns. The soybean market was pressured by worries about a venue for signing a new trade accord, if one can be reached. The Trump administration still expects to sign an initial trade agreement with China next month despite the cancellation of the APEC summit in Chile where officials had hoped to finalize the pact, the White House said in a statement on Wednesday. The Asia-Pacific Economic Cooperation forum did not yet have an alternate location planned for its Nov. 11-17 meeting after Chile earlier on Wednesday canceled its plan to host world leaders amid violent protests there. In addition, worries about the timing of Chinese soybean purchases also rose after U.S. Treasury Secretary Steven Mnuchin said on Wednesday that it will take time for Chinese purchases of U.S. agricultural goods to "scale up" to the $40 billion to $50 billion annual level touted by President Donald Trump if the two sides can seal a "Phase 1" trade deal.

Wheat:  December SRW wheat futures closed down 2 1/4 cents at $5.09 1/4 and hit a two-week low. December HRW futures lost 3/4 cent at $4.18 1/4. Spring wheat futures fell 1 ½ to 2 1/4. Market bulls have been losing traction for nearly two weeks, since hitting a multi-month highs in mid-October. The markets need a dose of fresh, bullish fundamental news to halt price erosion. The big speculative “funds” flipped last week to net-long 12,099 SRW futures and options contracts, the first bullish net position since August and mainly due to a near-term bullish chart posture for SRW. However, the funds remain modest net shorts in both HRW and spring wheat futures amid record global supplies. Wheat futures prices are also pressured by worries that Argentine farmers will quickly sell their wheat supplies before a new president raises export taxes in December.

Cotton: December cotton futures closed up 98 points at 65.70 today, settling near the daily high and hit a 3.5-month high. Cotton futures rallied today in part due to some upbeat economic data. U.S. growth was better than expected in the third quarter, at up 1.9% year-on-year, because of resilient consumer spending and a rebound in exports. The Federal Reserve this afternoon announced a 25 basis-point reduction to the target range for the Fed funds rate to 1.50% to 1.75%, which should further stoke U.S. consumer spending. Major U.S. stock indexes this week also hit record highs. These are elements that suggest improving U.S. consumer demand for cotton. Cotton bulls should not get too excited, however, as there are strong technical resistance layers that lie just above present price levels. Also, farmer selling of their cotton crop likely to increase significantly with the move to a new multi-month high in futures today. The big data point of the week in the cotton futures market will be Thursday morning's weekly USDA export sales report. Traders will be looking for any big China purchases of U.S. cotton.

Hogs:  Hogs erased earlier declines and closed higher and near session highs. December hogs rose $1.45 to $65.775, while February hogs rose 65 cents to $73.275. Futures rose on speculation the seasonal decline in cash hogs may be slowing. However, the weekly Iowa-Minnesota weight report showed a 1 lb. gain last week and now up 3 lbs. from last year, compounding the record-large hog supplies. Wholesale pork cutout values slipped a penny at midday Wednesday after rising 69 cents Tuesday on strong sales.  Softer loin and ham prices offset strong gains in bellies and modest advances in ribs, buts and picnics today. Prices responded to positive comments about potential Chinese purchases of pork and other agricultural products. U.S. Treasury Secretary Steven Mnuchin said on Wednesday that it will take time for Chinese purchases of U.S. agricultural goods to "scale up" to the $40 billion to $50 billion annual level touted by President Donald Trump if the two sides can seal a "Phase 1" trade deal. Mnuchin told Reuters in an interview in Saudi Arabia that the $40 billion to $50 billion target is "a lot," but is based on "very specific discussions" of product purchase commitments by China. Mnuchin said he does not anticipate he and U.S. Trade Representative Robert Lighthizer would take another trip to Beijing to try to nail down the text, as phone calls have been productive and will continue. Mnuchin said he "appreciated" comments on Tuesday by China's vice Commerce Minister, Wang Shouwen, that China will eliminate foreign investment restrictions on financial services and many other sectors. Thursday’s weekly USDA export sales report will be closely scrutinized for increased Chinese purchases.

Cattle: October live cattle futures settled 2 1/2 cents higher at $113.375. The December through June contracts posted gains of 97 1/2 cents to $1.475. October feeder cattle ended 60 cents higher, while deferred months closed $2.40 to $3.20 higher. Buying in October live cattle futures was limited ahead of tomorrow’s expiration as traders wait on cash cattle trade to develop. Based on the price action, firmer cash prices are expected. The online Fed Cattle Exchange reported light sales in Kansas and Texas in the $112 to $112.75 range, up from $109 last week. There have been no reports of cash trade in the traditional cash-negotiated market. Technical-based buying fueled much of the price strength in deferred live cattle futures. Buy stops were triggered on the push through resistance levels. The high-range close sets the market up for followthrough buying Thursday, though a bout of profit-taking is possible if early buyer interest is limited.  

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