After the Bell: Corn, Soy Drop as Stronger U.S. Crop Ratings Raise Trade Yield Estimates

Posted on Tue, 07/28/2020 - 15:04

Corn: December corn futures closed down 4 1/2 cents at $3.30 and hit a four-week low today. Timely rains and a break from the heat in the U.S. Midwest led to an unexpected three-point jump in the amount of corn rated “good” to “excellent” (G/E), with 72% of the crop now falling in the top two categories. That’s a rare feat to have such a high rating for this time of year and is significantly bearish for near-term price action. Agronomic and condition models currently favor a national yield between 178 bu. and 183 bu. per acre, compared with the trendline USDA model at 178.5 bushels. Some say it could top 185 bu. per acre with a slow, stress-free grain fill through August. USDA is beginning to survey farmers about the yield potential ahead of the Aug. 12 report. Each bushel above trend adds 84 million bu. to supply.

Soybeans: November soybeans fell 12 1/4 cents to close at $8.87 ½. December meal lost $4 to $297.50 and December soyoil fell 22 points to 29.92 cents. Soybeans pushed sharply lower on better U.S. crop ratings and favorable weather forecasts. The lack of any new Chinese export sales announcements from USDA this morning halted 10 straight sessions of new grain or soybeans sales to China or unknown destinations and added pressure after the reopening this morning.  Soybean crop conditions also improved 3 points in the week ended July 27 to 72% G/E, with strong gains reported in Nebraska, Illinois, Kansas and the eastern Corn Belt. It is unusual to see conditions improve by such a large amount at the end of July. That has traders raising their national yield forecasts.

Wheat: Futures closed lower but near midrange. December SRW futures fell 4 1/2 cents to $5.30 1/4 and December HRW was down 3 cents to $4.47 1/2. September spring wheat fell 1 3/4 cents to close at $5.06 ¼. Futures fell on better U.S. spring crop conditions and lower corn prices. There are worries that big new-crop corn and soybean export commitments will limit wheat shipments. World supplies are large and exporters in the Black Sea region will continue to move supplies into the end of 2020. Timely rains also helped spring wheat ratings climb two percentage points to 70% G/E as of Sunday, USDA said on Monday. Today, Egypt’s state-owned buyer purchased 470,000 MT of wheat from Russia and Ukraine for shipment in early September at higher prices than last week’s sales.

Cotton: Futures held to a narrow trading range today, with futures posting an inside day of trade and settling midrange with losses ranging from 1 to 10 points. Cotton had a limited response to yesterday’s crop condition rating from USDA. The department raised the amount of crop rated “good” to “excellent” by two percentage points, with 49% of the crop now falling in the top two categories. It also reduced the amount of crop in the “poor” to “very poor” categories by six percentage points, with just 16% of the crop falling in those categories now. The data added to ideas heavy rain associated with Hurricane Hanna will have little overall impact on the Texas cotton crop.

Hogs: August and October lean hog futures finished 35 and 2 1/2 cents lower, respectively. Farther deferred months ended 25 to 60 cents higher. The premium August hog futures hold to the cash index mildly weighed on the front-month contract today. The cash index has been trending higher the past three weeks, but August hogs finished today at a $3.08 premium to where the cash index will be quoted tomorrow (as of July 27). With just over two weeks until August hogs expire, the cash market likely needs to strength to attract buyer interest. Winter-month contracts forward continue to trade at premiums to the cash index, signaling traders have China premium built into prices. The pork cutout value surged $8.66 this morning on strong gains in bellies, hams, ribs and loins.

Cattle: August live cattle futures closed up 47 ½ cents at $100.90 and October live cattle gained $1.175 at $105.00. October feeder cattle futures closed the day up $1.25 at $141.925. Today was an important test for the cattle market bulls after prices jumped higher on the open on Monday and then closed sharply lower, forming an outside-day reversal pattern.  Bulls rebounded today in decent fashion to keep the near-term price uptrends in place on the daily bar charts.Boxed beef prices were mixed again Tuesday at noon, with Choice rising 84 cents and Select slipping 2 cents; movement slowed to 63 loads. It will be important to see an improvement in wholesale beef trade the rest of this week. Today’s Choice-Select grade spread did widen out to $13.78, which is a positive and suggests the beef market may have made a seasonal bottom.