After the Bell: Wheat Leads Chicago Rally on Cold Temperatures, Short Covering

Posted on 11/12/2019 2:47 PM

Corn: December corn futures closed up 4 1/2 cents at $3.77 3/4 today, while March corn also rose 4 1/2 cents to$3.86 1/2. Prices closed near their daily highs on short covering from recent selling pressure. Good gains in the wheat futures markets today also spilled over into some buying interest in corn. Also positive was today's weekly USDA corn export inspections that came in at 560,105 metric tons, which was much better than last week's report showing 283,704 metric tons. Corn harvest continues to drag on, with traders looking for harvest to come in near 65% done as of Sunday in tonight’s weekly USDA crop progress update. Those unharvested acres remain at risk of further yield losses. But any declines won’t be available until January, when USDA releases the final crop summaries. Light farmer selling continues to support strong cash basis levels, firming futures spreads and overall underlying market support. Ethanol margins are firmer, and production may rise for a seventh straight week. Data will be out on Thursday this week.

Soybeans: Soybean futures spent the day trading within the lower half of yesterday’s trading range. The market settled steady to ¾ cents higher in all but the March contract that ended a quarter cent lower. Soymeal gained of $1.60 to $1.90 for the day, while soyoil posted losses in the 35 to 39-point area. President Donald Trump didn’t give away much on the China front in a speech today to the Economic Club of New York. He said the two sides are close to signing a “Phase 1” trade deal but also that he would only sign a deal that’s good for the U.S. and its workers and threatened to raise tariffs on Chinese goods if a deal isn’t reached. In other news, weekly soybean export inspections were solid at 1.332 MMT, but the tally was in line with expectations. Shipments are running more than 9% ahead of year-ago levels at this point. Rain has improved soil conditions in some key producing areas of Brazil this week, though more rain is needed and northeast areas of the country remain dry. South American Crop Consultant Dr. Michael Cordonnier lowered his soybean production estimate for Argentina by 1 MMT to 55 MMT today, and his bias is lower going forward, citing dry weather in southern and western areas of the country.

Wheat: HRW futures led gains in the wheat markets today, finishing 15 to 16 cents higher. SRW contracts ended 10 to 11 cents higher. HRS futures firmed 5 to 6 cents. Wheat futures were supported by extreme cold across the country’s midsection. Not only are the cold temps a threat to newly emerged winter wheat, but this means any acres that weren’t yet seeded in areas where soil temps are below freezing, will go unplanted. Winter wheat seedings were already expected by many analysts to be steady to lower than last year. The winter wheat crop concerns fueled corrective buying in the SRW and HRW markets today. While funds were mildly long SRW wheat as of Nov. 5, they were short nearly 35,000 contracts of HRW futures. That would suggest fund short-covering in HRW futures is needed for extended price gains. Weekly wheat export inspections were above the top end of pre-report estimates at 528,875 MT. Wheat inspections are running 23.1% ahead of year-ago, whereas USDA projects a 1.5% increase.

Cotton:  Cotton closed higher and near last week’s highs. December futures rose 45 points to 64.75 cents on Tuesday. U.S. President Donald Trump on Tuesday dangled the prospect of completing an initial trade deal with China "soon" but offered no new details on negotiations in a campaign-style speech touting his administration's economic record. Markets had been on edge about Trump's highly anticipated remarks to The Economic Club of New York, but barely moved after the speech, which contained no major policy announcements. Trump said U.S. and Chinese negotiators were "close" to a "phase one" trade deal, but largely repeated well-worn rhetoric about China's "cheating" on trade. Trump said he would raise tariffs on Chinese goods "very substantially" Prices remain supported by the Nov. 8 USDA report showing lower U.S. and world production and ending stocks estimates for the 2019-20 crop year. U.S. production was cut to 20.8 million bales vs 21.7 million bales predicted last month, while world production was cut nearly 3.0 million bales with cuts to Pakistan, India and China adding to the U.S. reduction. Some buying was tied to speculation USDA may further reduce the size of the U.S. crop amid talk of increased abandonment of low-yield fields.

Hogs:  Hog closed higher in in the upper third of today’s price range. December hogs rose $1.425 to $64.725 with February rising $1.825 to 75.55. Hog prices rallied after Tyson CEO Noel White said the African Swine fever outbreak is finally having an impact on U.S. pork prices, which are rising during a period of record hog supplies and seasonal price weakness. China importers are willing to pay high tariffs on U.S. pork to boost supplies, White said. The market is looking for a further rise in Chinese buying, especially if the tariffs are cut. Midday pork cutout values jumped $2.73 on Tuesday led by a surge in ham prices. China is reporting new incidences of ASF in Northern China in the same spot that it was first discovered in August of 2018. The new discoveries reflect how difficult the disease will be to eradicate. China’s pork herd decline will deepen into mid-2020. Chinese pork price rises have slowed, but large imports are expected heading into their Lunar New Year holiday in late January.

Cattle:   December live cattle closed down $0.125 at $119.75 and February futures ended down a dime at $125.575. Both contracts finished nearer their session highs. January feeder cattle futures closed steady at $147.125 today and did hit a six-month high.  Live and feeder cattle futures prices continue to trend higher. Higher cash cattle trade and continued strong beef prices are keeping a firm undertone to the futures market. However, while U.S. consumer demand for beef remains strong, higher average cattle weights are now a concern, presently above the averages seen the past two years. Choice-grade beef prices rose $1.46 today and Select grade gained $3.12. The Choice select spread fell to $23.24, on movement of 55 loads. One negative setup for cattle futures is the meeting Nov. 17 between USDA Secretary Perdue and Brazil ag minister to discuss Brazil exporting beef to the U.S.


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