After the Bell: Small Corn, Soy Gains as Favorable Weather Offsets Big China Buying

Posted on Thu, 07/30/2020 - 15:30

Corn: Futures ends slightly higher but near session lows. December corn rose 1/2 cent to $3.26 3/4. Corn closed higher but given the big new Chinese corn sales, it was very disappointing finish. USDA’s daily export sales reporting program announced private exporters reported two large sales of corn this morning. China bought 1.937 MMT of U.S. corn for new-crop delivery, the largest one-day sale ever to the second-biggest corn grower. In addition, another 130,000 MT of corn were sold to unknown destination for new-crop delivery. Chinese corn prices continue to rise and spur speculation that shortages are developing, and imports will rise. China has sold almost all the corn auctioned from the 2014 and 2015 harvests and stored in state silos since May. Today’s auction fetched an average of about $7.39 a bushel, suggesting a big profit margin for imported U.S. corn. It’s not an ideal grain-filling weather forecast for early August but good enough to keep traders raising their yield forecasts.  

Soybeans: After an early morning test, futures pared losses and eventually turned higher, with futures settling ¼ to 3 cents higher. Soymeal also reversed to the upside and posted gains of $1.20 to $2.90 for the day, with soybean oil finishing 5 to 31 points higher. A non-threatening forecast heading into the key month of August on the heels of a three-point jump in crop condition ratings initially weighed on the soybean market. But as the day progressed, traders shifted some attention to the demand side of the market and even some possible weather concerns. USDA reported strong buying by China and others pushed overall soybean export sales to 3.602 MMT the week ending July 23, with the bulk of that business being for 2020-21 delivery. A strong showing was anticipated after recent big daily sales announcements, but new-crop sales still topped the highest trade estimate by more than 1.3 MMT.  

Wheat: SRW wheat futures finished 1 1/2 to 3 1/4 cents lower and HRW contracts dropped 5-plus to 6 cents. Spring wheat futures ended steady to 2 cents higher today.  Wheat futures failed to pull support from stronger-than-expected export sales. For the week ended July 23, USDA reported wheat sales of 676,600 MT, which were up 10% from last week and 30% from the four-week average but China wasn’t on the list of buyers.  A weakening dollar is helping make U.S. prices a little more competitive, but not enough to give American supplies the price advantage. Given that U.S. wheat is priced above key exporting countries, it’s likely going to take notable purchases by China to get traders excited about the demand side of the market.  

Cotton: December cotton futures rose 157 points to close at 63.18 cents and near the daily high. Cotton futures traders today focused on adverse weather in Texas following the recent hurricane. The lower Rio Grande Valley in was hammered last weekend when Hurricane Hanna’s high winds and pounding rains ripped through the region, severely damaging what was expected to be a very good crop. Damage estimates will take time. There will be yield and quality reduction from Hanna, but the majority of the Coastal Bend was spared serious damage.  A slumping U.S. dollar on the foreign exchange market is also working in favor of the cotton market bulls. The U.S. dollar index today fell to a two-year low.

Hogs: August lean hog futures closed down $1.65 at $51.425 and October hogs lost $1.50 at $48.325. Bulls are fading this week. Friday’s close in lean hog futures, to end July trading, will have an important directional impact on August trading. Cash hog bids slipped 37 cents at midweek, paring this week’s small gains. The pork cutout value at noon Thursday fell another $1.17 on weakness in hams and ribs. Movement slowed to 223.34 loads. Meanwhile, USDA reported this morning that U.S. pork export sales last week rose to 39,600 MT, up 12% from the prior four-week average. China bought a net 17,800 MT and Mexico purchased 15,400 MT. Another 400 MT were sold to Australia for 2021. Weekly pork shipments slowed to 31,500, down 3% from the prior four-week average.     

Cattle: Prices opened weak and closed near session highs for a third straight session. October live cattle gained 70 cents to $106.75 and December rose 50 cents to $110.45. September feeders jumped $1.85 to $144.425.  Prices pushed up to resistance by the close, after a weak start. The futures are signaling that cash markets are bottoming despite worries about large supplies into the end of the year and signs Covid-19 is slowing the economic recovery. Some scattered direct cash cattle trade took place across the region at mostly steady money with earlier this week and up $1 from last week.  Midday boxed beef was higher on active sales. Choice was 17 cents higher at $201.28 and Select jumped $2.05 to $191.54.  Export sales last week jumped 81% from the prior four-week average to 29,500 MT, a new marketing-year high.