After the Bell: Grains, Soy Slightly Lower after Initial Surge Overnight

Posted on Mon, 05/03/2021 - 15:00

Corn: Corn futures started May with a bang, gapping higher on the open and pushing to new contract highs, with May futures hitting the highest price for a front-month contract since 2013. Profit-taking eventually moved in and the market settled 7 ¾ cents lower in the May contract, 6 ¼ cent higher in the July contract and fractionally mixed to lower in deferred months.  Sliding safrinha corn crop estimates for Brazil and a warm, dry forecast for key producing areas shot prices higher today. On Friday, Safras & Mercado slashed its corn crop forecast for Brazil from 112.8 MMT to 104.1 MMT, and StoneX dropped its Brazilian corn crop projection from 105.06 MMT to 100.25 MMT. That’s in line with South American Crop Consultant Dr. Michael Cordonnier’s latest projection; he’ll update his forecast later today. With crop sliding, and some saying a crop in the mid-90s MMT is a possibility, the “easy” call is that USDA’s 109 MMT projection is too high.  

Soybeans: July soybeans slipped 5 3/4 cents to close at $15.24, while November was up 5 cents at $13.44 3/4. July meal tumbled $11.00 to $415.10 as July soyoil rose 67 points to 63.06 cents. Soybean futures gapped higher to start the new trading month but came up short of the contract highs set last week and ended lower in the old-crop months. November closed slightly higher on Monday. While upside may be limited leading up the May 12 USDA supply and demand update, breaks are likely to attract fresh buying interest from both end-users and funds.  Funds were net buyers of 7,470 soybean futures and option contracts in the week ended April 27. While far lighter than expected, the new net-long positions of 180,014 contracts were the largest since the end of December. Traders expect USDA to report soybean planting progress tripled to 25% completed as of May 2, up from 8% a week earlier. However, the range of traders surveyed by Reuters was a large 17% to 34% compared with 23% planted a year ago.  

Wheat: Futures finished low-range after overnight price gains failed to hold during daytime trade. The winter wheat markets ended mostly 12 to 17 cents lower. Spring wheat futures finished 5 to 7-plus cents lower. Wheat futures followed the corn market higher during the overnight session and early in daytime trade. As corn came well off its highs, wheat followed as traders actively took profits out of the long side of the market. Funds were net sellers on the day, trimming some of their net long positions in all three markets. Areas of the Southern Plains received rains late in the weekend and overnight, with more in the forecast. But coverage will be light and scattered. Cool temps are expected much of this week. Portions of the Northern Plains are expected to receive precip in the form of rains and snow this week, but it won’t be enough to alleviate the dry soils.  

Cotton: July cotton closed down 22 points at 87.86 cents today and December futures rose 14 points at 85.20 cents. Cotton traders continue to closely examine what’s going on in the grain markets. Today’s mostly lower trade in the grain futures limited buying interest in the cotton market. A weaker U.S. dollar index today and higher crude oil prices did work to limit the downside in cotton futures, however. U.S. stock indexes still trading not far below their recent record highs is also a bullish underlying element for the fiber. Tonight’s weekly USDA crop progress report is expected to show U.S. cotton planting progress in the upper teens, percentage-wise, versus last week’s 12% planted. The cotton-planting pace starts to pick-up significantly after May 1.

Hogs: June hogs rose $2.925 to $112.65 and August rose $1.925 to $107.425. Volatility remains high and prices are continuing to climb. The market continues to be supported by the rally in cash hogs and pork cutouts, uncertainty about African swine fever outbreaks in China and spiking feed markets.  Weekly slaughter totaled 2.454 million head, just slightly less than the 2.473 million the prior week, but generally in line with what we’ve seen the past four weeks now. These rates are lower than expected six weeks ago, and we’ll still be expecting rates to take another notch lower as we move through the next eight weeks. Cash hogs were sharply lower at midday with light negotiated purchases. Packers continue to monitor the availability of market-ready barrows and gilts and took a bit of a breather to start the week.  National direct hogs were quoted $3.61 lower with a base range of $107.05 to $116 and a weighted average of $108.15.  Meanwhile, pork cutout values at midday rose $1.83 on light sales but erased last week’s $1.48 decline.   

Cattle: June live cattle closed down $1.275 at $115.30 today. Prices closed near the session low today and scored a bearish outside day down on the daily bar chart. August feeder cattle closed up $0.05 at $146.80 today. Prices closed nearer the session high today after hitting a 5.5-month low early. Soaring cash corn prices continue to keep a lid on buying interest in the cattle futures markets, despite some bright spots in the overall fundamental picture. Futures continue to be dragged lower by weakness in cash bids, despite soaring beef prices and demand. Cash trade this week is likely to be steady-weaker. The beef product market has been screaming for more production, but last week’s kill decreased 2.4% from the week prior. The grilling season is just under way and Americans are feeling pretty good about the economy’s growth prospects the rest of this year, including restaurants and bars continuing to ramp up their seating. These factors suggest the cash cattle market should be making a cycle low very soon.