After the Bell: Soy Surges to 6 1/2-Year Highs, Supporting Corn, Wheat

Posted on Fri, 12/18/2020 - 14:30

Corn: Corn futures finished 4 1/4 to 5 cents higher in 2020-crop contracts today, while December 2021 futures ended 3 1/2 cents higher. For the week, March corn rallied 14 cents and finished near weekly highs. Despite the strong weekly gains, futures failed to clear the November highs. Corn futures road on the coattails of the surge in soybeans this week, so it’s only logical that price action in that market will influence corn again next week. Aside from spillover influence, traders will closely monitor South American weather. While central and northeastern Brazil are in line for more rains next week, far southern Brazil and the key production areas of Argentina are expected to see a return of hot, dry conditions. There are a record number of corn export commitments on the books, which will put focus on corn shipments in early 2021.

Soybeans: March soybean futures closed up 18 1/2 cents at $12.24 today and hit a contract and more-than-six-year high. For the week, March soybeans gained an impressive 58 cents.  March soybean meal futures hit a contract high and closed up $7.90 at $405.30 and for the week rose $23.90 a ton.  Look for follow-through technical buying early next week following this week’s good gains in beans, meal and oil that produced bullish weekly high closes on Friday. The soybean market is likely to remain supported by the record U.S. crush pace, sustained export shipments and better sales. There has been some talk China may be shifting some February purchases from Brazil to U.S.-origin as Brazilian crushers are eager to outbid exporters for early-harvest supplies. Focus of grain traders in the coming weeks will be on South American weather.  

Wheat: March soft red winter wheat futures closed the day down 1/2 cent at $6.08 1/4 and for the week lost 6 1/4 cents. March hard red winter wheat futures today closed down 3/4 cent at $5.69 1/4 and on the week fell 12 cents. March spring wheat fell 1 1/2 cents this week to close at $5.68 1/2. Wheat price action has been choppy recently and the bulls struggled a bit Friday. However, the strong bull runs in corn and soybean futures are likely to keep a floor under the week market for at least the near term. Traders next week will continue to debate the immediate and longer-term impacts of Russia’s new export taxes and export quotas on world trade flows. Traders on Thursday reported delays in obtaining export documents from Russia's customs service.

Cotton:  March cotton futures prices closed Friday down 3 points at 77.16 cents, but for the week March cotton gained an impressive 308 points. The strong surge in cotton futures prices this week may lead to some follow-through price strength early next week. However, technical studies show the cotton futures market is now short-term overbought, suggesting the market needs a pause or corrective pullback in the existing price uptrend. Weekly U.S. cotton exports surged 44% from the prior four-week average, led by sales to China. The strong demand will likely keep sellers in the cotton futures market very timid for at least the near term. Focus of cotton traders will continue to be on the key “outside markets” that include the U.S. stock market, whose major indexes this week hit record highs.

Hogs: Hog futures end higher after successfully testing the November lows. February hogs were up 30 cents to close at $65.80 on Friday, extending this week’s gain to $2.575. April hogs gained 62.5 cents to $69.925 and $2.425 higher this week. Futures ignored softer cash fundamentals to trade higher this week, as traders decided to exit shorts ahead of key data next week on pork inventories and the size of the hog herd. Cash hogs were lower at midday amid ample supplies and reduced slaughter schedules. Cash hogs fell to the lowest since the middle of September this week. Midday pork cutout values fell another 70 cents to $72.52, the lowest since late august and down from more than $100 in mid-October. Idling of a Columbus Junction, Iowa pork processing plant pressured cash markets, but it looks like they adjusted schedules at other plants to account for the reduction. The Dec. 22 USDA Cold Storage and Dec. 23 Hogs & Pigs reports will set the tone for price direction into the middle of 2021.  

Cattle:  February cattle futures rose 40 cents to $114.85 on Friday, capping a gain of $1.60 this week. March feeders were down 30 cents on Friday to close at $142.30, paring the weekly gain to $1.75. Direct cash cattle trade was quiet Friday but stronger bids Thursday from early-week trades provided underlying support to the market today. Boxed beef was mixed at midday on light to moderate demand for light offerings.  Choice was $1.46 lower at $208.05 and Select was $1.40 higher at $195.10. This afternoon’s Cattle on Feed Report data was in line with pre-report estimates. On feed numbers were up 5,000 head to 12.036 million head, while placements were fell 8.9% in November from a year earlier. Now the market will be focused on beef demand.