After the Bell: Beans Pare Weekly Gain, Cattle Show Signs of a Seasonal Low

Posted on Fri, 02/14/2020 - 14:44

Corn: Following a two-sided day of price action, corn futures finished low-range with losses of 1 3/4 to 3 1/4 cents through the December contract. For the week, March corn futures dropped 5 3/4 cents. The poor close today means bulls will likely have to defend support at the winter lows early next week. If they can’t, futures could make a run at the contract lows from last fall. If the winter lows hold, it wouldn’t be surprising to see a round of fund short-covering. But the upside is limited barring fresh bullish news. Much of Brazil’s safrinha corn crop is going to be planted after the ideal window closes. That elevates risk of dryness during pollination and filling, but it doesn’t guarantee lower yields. Given that most of the crop will be planted into wet soils, risk of a disastrous second crop are likely low.  

Soybeans:  Futures ended lower, paring its second straight weekly gain. March soybeans fell 2 ½ cents on Friday to $8.93 ¾ but still up 11 ¾ cents this week. November fell 1 ¼ cents today to $9.22 ½ and up 4 cents this week.  March meal gained $1.80 this week to close at $291.20.  March soybean oil fell 40 points this week to close at 30.57 cents. Soybeans moved higher this week after USDA raised in annual export forecast 50 million bushels and cut the ending stocks by the same amount based on stronger sales to China as part of the Phase 1 trade deal. Traders will be watching for more business in the weeks ahead to sustain the rally as China tariffs will be reduced slightly today. USDA’s initial U.S. projections for the 2020-21 marketing year will be released at the Ag Outlook Forum Feb. 20-21. The new-crop U.S. balance sheets could better reflect expected Chinese demand under the two-year trade agreement.  

Wheat: SRW wheat futures saw two-sided action today before settling mid- to low-range and down 1 ½ to 3 ½ cents. HRW and HRS wheat futures saw similar price action and closed steady to 1 ¼ cents lower. March SRW wheat futures finished 16 cents lower for the week. USDA’s Ag Outlook Forum takes place Feb. 20-21, which includes new updates to the 2020-21 long-term supply and demand tables. Commentary from the event could shed some light on how the department expects recent trade deals with China, Japan, Mexico, Canada and South Korea to impact the balance sheet. The National Weather Service will also update its 30- and 90-day forecasts next week, providing some clues as to how spring planting might play out.  

Cotton: Cotton futures posted losses of 22 to 34 points through the December contract. For the week, March cotton futures dropped 34 points, which was today’s decline. The National Cotton Council holds its annual meeting this weekend, at which it will release results of its acreage survey. Those results will help guide price action early next week. USDA’s long-term projections, which are used mostly for budgetary purposes project a 1.7-million-acre decline in cotton plantings this year. The market will get a better expectation for USDA’s acreage forecast late next week when it releases its initial 2020-21 balance sheets at the Ag Outlook Forum.  Certificated cotton stocks tightened under 6,000 in late January but have rebounded to more than 32,000. That limits chances for a short squeeze in March futures during delivery.  

Hogs: Hog’s ended mixed Friday and lower this week. February expired at $55.90 today. April futures were up 22.5 cents to $64.30, paring the weekly drop to $1.95. June hogs slipped 12.5 cents today to $80.90, down $1.65 for the week. Cash hogs opened mixed Friday with some buying interest developing and closed lower for the week. Wholesale pork prices were slightly weaker at midday with loins, ribs, and bellies all lower. Pork and hog prices are likely setting seasonal lows as supply begins to taper. Slaughter this week fell 3.5% to an estimated 2.596 million head from 2.691 million a week earlier. Slaughter was up 4% from a year ago. Pork exports in the week ended Feb. 6 remained strong at 94.5 million lbs., or more than double last year. Sales to China remained slow after record sales to end 2019. But 30% of total U.S. exports were shipped to China last week.  

Cattle: Cattle futures pulled back from session highs, but still closed the week on a strong note. Live cattle posted gains of 92 1/2 cents to $1.80 through the December contract. Feeder cattle finished $2.15 to $2.425 higher through the November contract. For the week, April live cattle futures firmed 52 1/2 cents to $120.325 after earlier in the week dropping to the lowest level in nearly five months. April feeder cattle firmed $3.875 this week. Technical price action late this week suggests the cattle market has put in a low following an extended round of heavy fund liquidation. Followthrough buying next week would confirm a low. Since the cattle market likes to post dramatic lows (and highs), it wouldn’t surprise us to see additional buying next week. After funds actively cut long positions, they may be ready to rebuild their length.