After the Bell: Wheat Rally Extended, Pulling Corn Higher; Soy Slump Again

Posted on 11/25/2019 2:05 PM

Corn: December corn futures closed up 1 3/4 cents at $3.70 1/2 and March futures gained 2 1/4 cents at $3.80 3/4. The last 15% of the corn harvest is going to go slow and increases risks for a smaller U.S. crop when USDA updates its forecasts in January. Traders are looking for USDA later this afternoon to say harvesting increased near 85% completed as of yesterday, up from 76% done last week. The Corn Belt weather forecast is wet the next 10 days, with heavy rain and snow and high winds from Colorado to New York with wide variations in temperatures.  Cash corn basis firmed as much as a nickel today amid very light farmer sales and tightening immediate supplies amid slow harvest progress. The corn market is also finding light support from progress during the weekend toward a U.S.-China trade deal. However, top U.S. negotiators will not be traveling to Beijing for talks this week.  Corn inspected for export in the week ended Nov. 25 slipped to 604,592 metric tons from 651,147 MT a week earlier and about half the total a year ago. Seasonal studies call for lows this week in corn futures. The market is oversold technically, so the probabilities are that we get some chart short covering this week.  

Soybeans: Futures ended lower and near session lows. January beans fell 4 ½ cents to $8.92 ½. January meal fell 60 cents to $300.60 a ton and soyoil futures were down 47 points to $30.59 cents a lb. China this weekend announced new guidelines aimed at stopping intellectual property theft that became the latest positive signal for trade talks. But we are still in a murky end-game for a Phase 1 deal that President Donald Trump on Friday declared “very close” and Chinese President Xi Jinping earlier that day insisted he wanted, too.  Prices were pressured by unconfirmed reports that Chinese buyers bought at least 20 cargoes of Brazilian soybeans last week because of the uncertainty about when a trade deal will be completed. Last week, there were reports that as much as 1.8 million metric (MMT) of soybeans, mostly for government reserves, were being held up at ports because local buyers must pay a big deposit to customers before they can collect tariff refunds.  China’s soybean imports from the U.S. fell to 1.15 MMT last month, the lowest in three months but still up from slightly less than 67,000 MT a year earlier.  Palm oil futures surged to a two-year high last week, reducing soybean oil’s premium to palm oil to its lowest level since 2011. This could help boost demand for soyoil, tightening stocks and boosting prices.  

Wheat: Winter wheat futures enjoyed strong folllowthrough buying to start the week, with the move to new highs for the month triggering some technical-based buying. SRW and HRW wheat posted gain ranging from 11 ½ cents to 15 ¾ cents for the day. Spring wheat futures posted more modest gains of roughly 3 to 5 cents. Production concerns are increasingly getting the market’s attention amid talk that cold temperatures and unattractive prices may have limited winter wheat plantings in the U.S. to the lowest level on record, at a time where weather has been less than ideal for other major producing areas. A wet fall has hindered winter wheat planting in western Europe, including top-producing France. Meanwhile, dryness is a concern in Argentina, Australia, Russia and Ukraine.  And a major union strike with Canada’s main railway is adding transportation woes to a lengthy list of struggles for farmers to our north. The Vancouver Grain Exchange on Friday declared an “event of delay” due to the strike—a declaration similar to our force majeure that allows all British Columbia grain shippers to avoid penalties to late delivery due to circumstances that are beyond their control.

Cotton: Cotton futures extended their rally for a second day and closed near session highs. March cotton rose 95 points to $65.80 cents on Monday. Cotton futures were supported by more signs the U.S. and China may find a way to reach a Phase 1 trade deal.  China this weekend announced new guidelines aimed at stopping intellectual property theft that became the latest positive signal for trade talks. But traders remain cautious are still in a murky end-game for a Phase 1 deal that President Donald Trump on Friday declared “very close” and Chinese President Xi Jinping earlier that day insisted he wanted, too.  The main driving factor for the recent strong rally in cotton futures prices has been one commercial delivering 663 contracts against the expiring December contract finding one commercial willing to take all the supplies. That is a sign of tightening inventories as farmers hold fiber waiting for better prices.  Prices also got a lift from forecasts for strong winds and rain over the next few weeks that may damage unharvested cotton from Texas to Virginia.  

Hogs: Futures erased earlier losses and closed steady to higher Monday. February hogs rose 10 cents to $67.75 and April gained 17.5 cents to $73.875. Prices rallied Monday, erasing early-session weakness on speculation a U.S.-China trade deal may be completed before new U.S. tariffs are enabled on Dec. 15. The Global Times, a tabloid run by the Communist Party, said China and the U.S. were very close to a Phase 1 deal, discounting negative media reports. China's pork imports in October doubled from a year earlier to 177,426 MT, and up from the previous month's 161,836 MT. Imports during the first 10 months of the year stood at 1.5 MMT, up 49.4% from a year earlier. Midday pork carcass cutout values jumped $1.88, led by a surge in bellies prices. However, sales were moderate to light. Futures opened lower this morning after pork cutout values fell $5.06 last week on moderate sales. On Monday, USDA said that commodity exporters must disclose sales of hog carcasses, giving officials and traders more insight into a surge of Chinese pork buying that has roiled global meat markets. The USDA published a rule to specify that exporters must report sales of pork and beef carcasses effective immediately, after its Foreign Agricultural Service was reporting late 1,000s of tons of meat sales and shipments the past several months. "Timely reporting and publishing of agricultural export sales data is key to effectively functioning markets," the USDA said in a statement.

Cattle:  February live cattle futures closed up $1.30 at $125.15 and hit a seven-month high today. January feeders gained $2.70 at $141.975 today on a corrective bounce after hitting a six-week low last Friday. The cattle market bulls continue to benefit from strong consumer demand and current marketings amid a booming U.S. stock market that suggests continued solid consumer demand. On Friday USDA reported U.S. feedlot inventories totaled 11.831 million head as of Nov. 1, which was right in line with the average pre-report estimate and up 1.2% from last year. The USDA Cold Storage report showed U.S. inventories of beef declined slightly, whereas they normally build during October. Beef stocks totaled 466.2 million lbs. as of Oct. 31, down 2.8 million lbs. (0.6%) from September and down 49.4 million lbs. (9.6%) from last year. The five-year average is a 9.5-million-lb. increase in beef stocks during October. Boxed beef prices were mixed Monday, with Choice cutouts rising $1.24 and Select dipping $0.19. The Choice-Select spread widened to $22.68.

Add new comment