After the Bell: Soy, Wheat, Livestock Surge on Improved Global Food Demand

Posted on Mon, 03/23/2020 - 14:47

Corn: Corn futures finished narrowly mixed, with the May contract 1/4 cent lower, the July contract unchanged and the September through March contracts 1/2 to 1 1/4 cents higher. Corn futures found limited support from strong gains in the soybean and wheat markets, as demand concerns for corn limited buyer interest. The latest demand concern for corn, which accelerated last week, is ethanol. Production margins are deep in the red, which is causing some plants to stop accepting corn, others to slow production and a few are starting to temporarily shutter. The ethanol demand concerns aren’t going to dissipate until margins improve and RBOB gasoline futures move back above ethanol futures. Ethanol futures finished 47 cents premium to RBOB today.  

Soybeans: Soybean futures opened under pressure, but quickly reversed higher, with futures ending the day with high-range gains of 10 ¾ to 21 ½ cents. Nearbys led the rally. Soymeal futures were the upside leader, surging $5.60 to $9.60 into the close. Soyoil futures posted gains ranging from 39 to 50 points. Demand hopes are driving a rebound in the soybean market amid ongoing reports that Chinese soybean stocks are running low as heavy rains and coronavirus confusion has led to some disruptions in South American shipments to the country. China’s soybean inventories are currently at their lowest level since at least 2010, spurring some optimism for U.S. shipments of the oilseed.

Wheat: May soft red winter wheat futures closed up 23 1/4 cents at $5.62 1/2 today and hit a four-week high. May hard red winter wheat futures ended up 20 1/2 cents at $4.89 1/2 and hit a four-week high. Spring wheat futures rose 8 to 9 cents. Wheat futures markets solidly extended last week’s rallies on stronger domestic and export demand. “Wheat is a staple of life,” reminds one longtime market analyst. Importing nations have begun and may further increase their purchases and shipments to maintain adequate inventories in an uncertain global economic environment as the Covid-19 outbreak continues to spread.  

Cotton: Prices tumbled to touch the lowest since 2009 on the weekly charts before paring some of losses by the close. May futures fell 153 points to 52.15 cents and December lost 226 to 52.77 cents. Cotton futures plunged more than 5.5% to a more than 10-year low on Monday as increasing global lock-downs due to the rapid spread of the coronavirus heightened concerns about falling demand for the clothing and household goods. More than one in three Americas have been ordered to stay home to slow spread of the disease. Some are estimating global demand will tumble at least 10% as consumers are shut in and quit shopping.     

Hogs: Futures closed sharply higher to limit up and daily limits expand to $4.50 on Tuesday. April hogs closed at $64.575 and June closed at $70.95. The limit-up nearby futures and weaker gains in deferred futures reflects the extraordinary spot demand in the short run led by grocery sales, but extreme concern regarding the economic outlook longer term. Pork cut-out values surged another $4.17 today at midday on strong midday sales. That followed a $10 advance last week.  Tomorrow will test the bulls. Sanderson Farms this afternoon confirmed an employee has tested positive for the Covid-19 at its McComb, Mississippi plant. Sanderson is implementing a site infection control plan. This is the first publicly confirmed positive test of a worker in a U.S. meat plant, though the plant is not closing.  

Cattle: June live cattle futures opened and closed locked up the daily trading limit of $3.00, ending at $92.525. May feeder cattle futures also rose the daily trading limit of $4.50, at $122.75. Surging domestic demand is driving cattle futures prices sharply higher, as consumers stock their freezers with beef ahead of a very uncertain next few weeks. Grocers are working hard to keep their meat cases stocked. Following last week’s record surge in beef cutout value, today’s noon beef report showed Choice grade cutout value up another $4.09 and Select up $5.03 on good movement of 173 loads. The Choice-Select spread was quoted at $12.64. The surge in beef prices to levels last seen in 2017 shot packer profit margins to $580.10 a head, a gain more than $410 for last week. That should support stronger cash cattle bids in the coming weeks.