After the Bell: Soybeans Slump on Rising U.S.-China Tensions, Corn Slips Lower

Posted on Thu, 05/21/2020 - 15:21

Corn:  July corn futures closed down 1 3/4 cents at $3.17 3/4 today and near mid-range. December corn lost a penny to close at $3.33 today. Corn futures prices are pulling back a bit, due in part to China’s Dalian corn futures dropping on rumors China’s government is restarting its corn auction to boost domestic supplies. China sold about 22 MMT in weekly auctions last year over a five-month period. Corn traders continue to wait for Chinese buying, with no new sales announced by the daily USDA reporting service today.  A fast start to the U.S. planting and growing season, with no major weather issues, is also a bearish element for the corn market at present.

Soybeans: Soybeans finished 5 1/2 to 11 3/4 cents lower through the March 2021 contract, led by front-month July futures. Meal futures finished mostly $2.20 to $3.00 lower. Soyoil posted losses of 21 to 25 points in most contracts. Soybean futures were pressured by harsher rhetoric from the Trump administration toward China, prompting concerns about impacts to the trade deal if relations sour. Any disruptions to Chinese purchases and shipments of U.S. soybeans, which have picked up and are expected to get much stronger the second half of the year, would be price-negative. The harsher rhetoric from Washington overshadowed strong weekly export sales. For the week ended May 14, old- and new-crop soybean sales totaled a combined 1.669 MMT. China was the buyer of 737,400 MT of soybeans for 2019-20 and 462,000 MT for 2020-21.  

Wheat Winter wheat futures enjoyed strong followthrough buying overnight and early this morning, but the markets were only able to muster mid-range closes, with SRW wheat up 2 ¼ to 4 ¼ cents and HRW wheat 1 ¼ to 2 ¼ cents higher. An early rally in spring wheat futures also petered out, with futures settling 1 ¾ to 3 cents lower. Wheat futures initially benefitted from followthrough buying as mounting concerns about the size of the global wheat crop helped push the market sharply higher at midweek. Dry weather in the Black Sea Region is getting more attention, with Russian wheat crop estimates on the decline. Dryness in Europe also bears watching. And scouts on a virtual winter wheat tour in Kansas and neighboring areas have found plenty of crop damage due to frost and dryness. But midday weather forecasts signaled chances for better rainfall in southeastern Europe and the Black Sea region next week.  

Cotton:  July cotton fell 15 points to 58.06 cents and December cotton fell 9 points to 58.70.  The cotton market is treading water after pushing to new swing highs earlier this week. The market is pressured amid more sparring between Beijing and Washington over the coronavirus while new tensions emerged on Hong Kong and Taiwan. Friday's annual National People's Congress (NPC) meeting was also looming after a 2-1/2 month delay due to COVID-19. The focus will be on Premier Li Keqiang's 2020 work report where he is expected to announce key economic targets and details on fiscal stimulus plans. The market found support after the index of leading economic indicators, a composite of 10 forward-looking components designed to predict general economic conditions six months in the future, fell less than expected in April.   

Hogs: Choppy session with mixed closes. July futures rose $1.375 to $57.175 and October fell 15 cents to $51.10.  Pork processing continues to improve. Slaughter this week is running more than 100,000 head above last week but still 287,000 head below last year. Price action was positive after futures rebounded from early losses after USDA reported weekly pork sales were a net reduction with a second week of large Chinese cancellations of prior purchases.  However, physical shipments of previously purchased pork rose to a marketing year high, mainly headed to China and Mexico. High prices have choked meat sales in general. Pork sales other than China have dropped hard and will need to recover to provide fresh support to the market.  

Cattle:  June live cattle futures closed up $0.40 at $98.80, while August feeder cattle futures lost $0.125 on the day, at $128.875, while hitting a two-week low.  Live cattle futures are pausing from recent gains, which is not bearish. Futures are still trading a wide discount to cash markets. Cattle slaughter Wednesday topped 100,000 head, the largest daily total in six weeks but still around 20,000 below normal, pre-Covid levels. Backlogs of feeder cattle are reportedly severe, as limited processing in recent weeks has limited feedlot demand. Today’s noon beef report showed Choice grade cutout down $2.16 and Select down $6.37 on light movement of 64 loads.