After the Bell: Grains, Soy Rally, Cotton Hits New Contract Highs

Posted on Mon, 02/22/2021 - 14:16

Corn: Futures finished on or near session highs with gains of 8 1/4 to 9 3/4 cents through the December contract. New-crop December futures gained 1 1/2 cents the March contract, a penny on May corn and 1 1/4 cents on July futures as traders unwound more bull spreads today. The bull spread unwinding is in reaction to last Friday’s initial projections for ending stocks to remain tight through the 2021-22 marketing year. While the old-crop supply situation is going to remain tight, that is factored into prices and traders expected USDA to project a bigger rebound in new-crop ending stocks last week. As a result, more bull spread unwinding is possible near-term. Weekly corn export inspections were as expected at 48.5 million bu., though that was lighter than the pace needed to hit USDA’s 2020-21 export forecast.

Soybeans: May soybean futures closed the day up 7 1/2 cents at $13.87 1/2. May soybean meal finished down $0.70 at $422.90 and May bean oil rose 33 points to 47.22 cents. The soy markets today caught the updraft of a general rally in the raw commodity sector to start the trading week, as the “reflation trade” appears to be getting more attention from speculative traders and financial press. Last Friday USDA issued new supply and demand forecasts that show soybean supplies will remain tight into the 2021-22 season. The acres, yield and production numbers did not come as a surprise, but what was a bit odd were the demand projections. For soybeans, total usage is forecast to drop about 40 million bu. from this year with exports reduced by 50 million.

Wheat: May SRW wheat closed up 14 1/4 cents at $6.69 3/4 today. Prices closed near the session high today and closed at a four-week high close. May HRW wheat closed up 12 3/4 cents today at $6.51.  The wheat markets today were pulled higher by rallies in corn and soybeans as well as a rally in many other raw commodity futures markets, as the speculators appear to be getting more interested in the “inflation trade.” It was a slow week for U.S. wheat export inspections, as there were 324,597 MT inspected in the latest week, compared to 418,816 MT inspected in the last reporting week. CFTC data on Friday showed money managers increased their net long in SRW wheat futures and options to 21,285 contracts, up nearly 2,000 on the week. They also reduced bullish bets in Kansas City wheat by about 3,000 contracts, resulting in a net long of 57,133 futures and options.

Cotton:  May cotton jumped 193 points high to close at 92.41 cents and December rallied 109 points to 86.59 cents. The cotton futures hit another round of contract highs today. The trade was supported by fewer deliveries against the spot March contract. There were a total of 18 notices tendered. Some traders were expecting numerous deliveries tendered given the price rally. The strong drop in the U.S. dollar index today helped to attract new speculative buying. The market remains supported by last week’s USDA projected supply and demand numbers.  The uncertainty of U.S. and South American weather will keep a firm floor under prices into the U.S. planting and growing season. The biggest negative is current high prices reducing cotton demand next season.

Hogs: Lean hog futures settled high-range with gains of 45 to 95 cents for the day. July and later futures set new contract highs today. Nearby contracts have moved sideways in recent days, but momentum continues to favor market bulls. The market has been bolstered by continued strong export demand from China especially. Today, the country’s ag minister, Tang Renjian, said China’s hog herd should reach pre-pandemic levels by June, but he also commented China needs to find ways to make its herd more stable. In addition, pork prices climbed 6.1% from December to January as demand outpaced supply. That adds to skepticism about Tang’s forecast. Tomorrow’s monthly Cold Storage Report will provide another gauge of demand during January.

Cattle: Cattle futures ended mixed, erasing or paring earlier losses. April live cattle were down 62.5 cents to $123.05 and June cattle fell 27.5 cents to $120.25. May feeders rose 35 cents to $146.075. Cattle futures were in the red most of the session amid technical selling and the premiums to current cash trade. In the week ended Feb. 16, funds increased net longs almost 5,500 futures and options, to 92,088 contracts, the most since May 2019. The number of cattle on feed, marketings and placements came in on the negative side of expectations Friday. On feed numbers were up 1.5% from a year ago, about 80,000 head larger than expected. Packers are expected to need some cattle, but steady bids may be enough to get the cattle they need as feedlots may be willing to sell.