After the Bell: Corn, Beans Tumble as Traders Cut Weather Risk Price Premiums

Posted on Tue, 08/04/2020 - 14:33

Corn:  December futures dropped 8 1/4 cents today, closed near the session low and hit a new contract low of $3.20, finishing the day at $3.20 1/4. An overall good-looking U.S. corn crop at present and no serious weather threats in the extended outlooks put the pressure on futures prices today. On Monday, USDA rated 72% of the U.S. corn crop in “good” to “excellent” condition and 7% “poor” to “very poor,” unchanged from last week and in line with trade expectations. When USDA's weekly corn condition ratings are plugged into the weighted Pro Farmer Crop Condition Index, the CCI rating at 381.7 points is now 11.0 points above the five-year average. Commodity broker StoneX projected a final U.S. corn crop at 15.320 billion bu. on a record national yield estimate of 182.4 bu. per acre.   

Soybeans: November soybeans fell 14 ½ cents to $8.81 3/4. December soybean meal closed down $4.30 to $291.40 and December soyoil futures declined 27 points to 31.05 cents. On Monday, USDA again surprised the trade with an unusual increase in soybean ratings, adding another percentage point to the “good” category to push the overall “good” and “excellent” conditions to 73%. Soybeans have only rated that high or higher twice since 1986. Back in 1994 and 1992, USDA raised its July forecast by more than 5% in the August update and further increased yields into the final estimates in January. The market is draining out any weather-risk premium that may still exist. USDA’s daily export sales reporting program did not announce any new large soybeans sales by private exporters this morning. The lack of new purchases added pressure to the market as U.S./China tensions continue to rise.

Wheat:  December SRW futures fell 12 3/4 cents to $5.16 1/2. December HRW futures fell 8 1/2 cents to $4.33 and September spring wheat was down 4 1/4 cents to $5.02 1/4. Rising U.S. spring wheat crop yield potential and better production prospects in Russia combined to push futures lower. Technical selling expanded after December HRW and September spring wheat fell to new contract lows and December SRW dropped to the lowest level since July 8. Agriculture consultancy IKAR said on Monday that it had raised its forecast for Russia's 2020 wheat crop to 79.5 MMT from 78 MMT earlier and 73.6 MMT last year. In July, USDA forecast 76.5 MMT crop. Russian exporters will be looking to boost sales into year end.  

Cotton:  In stark contrast to many other crop markets, the cotton market settled high-range with gains of 14 to 40 points after a two-sided day of trade. After a strong start to the week, cotton futures saw a mix of profit-taking and followthrough buying, with the latter helping the market to a higher close. Traders were impressed by the market’s ability to hold gains above the 200-day moving average. Support for the move stemmed in part from a four-point drop in the amount of cotton USDA rated “good” to “excellent” as of Sunday, with just 45% of the crop now falling in those categories. This combination encouraged funds to get back into long position today.   

Hogs: Lean hog futures closed with a mixed tone, with prices ranging from 45 cents lower to 62 1/2 cents higher through the April 2021 contract. Hog futures showed followthrough selling early, but seller interest dried up given that August and October hogs are now slightly below the cash index and premiums in far-deferred contracts have been greatly trimmed. The limited seller interest suggests there is underlying support and that lows may be close. But seasonally, hog prices typically face pressure during the third and fourth quarters of the year. The average national direct cash hog price was 37 cents lower this morning after dropping 66 cents on Monday. While packer margins are strong, market-ready supplies are abundant, which could put more near-term pressure on the cash market.  

Cattle:  October live cattle futures closed down $0.80 at $107.465 and October feeders lost $0.15 at $147.075. Both markets saw mild, profit-taking pullbacks after hitting five-month highs on Monday. Today’s price action in live and feeder cattle futures is so far just corrective pullbacks in price uptrends on the charts. However, boxed beef movement has slowed amid higher prices in recent days, which is a bit concerning. There were a strong 78 loads moved at midday today, with Choice cutouts up 22 cents and Select falling 15 cents. Demand uncertainty may start to increasingly curb bullish enthusiasm from the lack of food service demand amid restaurant limits, and with there still being questions regarding public schools’ lunch programs being implemented this fall.