After the Bell: Grains, Soy Rally on Demand, Weather Concerns; Livestock Mixed

Posted on Tue, 05/04/2021 - 14:53


Corn: July corn jumped 17 1/4 cents to $6.96 3/4 and December rose 17 1/2 cents $5.80 1/2. The market turned in a positive price performance today despite U.S. planting jumping 29 points to 46% complete as of May 2 and 10 points ahead of the prior five-year average. Farmers in Iowa planted 49% of their intended corn acres last week and planting jumped 43 points in Minnesota and 36 points in Nebraska. However, emergence was reported just 8%, 1 point below the five-year average and cold temperatures this week will further slow development. The bulls’ focus is on the deteriorating Brazil crop that is getting smaller each day from the drought that grips about 60% of the production region with little relief in sight the next 30 days. Nearby crude oil futures rose to a seven-week, as it approached $66 per barrel. Ethanol futures touched the highest since 2014. Ethanol exports in March rose 31% from February with shipments to China accounting for 36% of the total and the second-largest monthly export to China. Yesterday, USDA said corn use for ethanol production rose to 420 million bu., up from 411.8 million bu. a year ago.   

Soybeans: July soybeans rose 14 1/4 cents at $15.85 1/4 a bushel today. Prices closed near mid-range today. July soybean meal closed up $6.40 at $421.50 today and nearer the session high. July soybean oil futures hit another contract high today and closed up 52 points at 63.58 cents. Soybeans continue to be supported by the surging corn market—both cash and futures. The expected very tight world supply and demand balance for soybeans has also put a floor under futures prices. There is some concern over reduced vegetable oil demand in India due to a surge in coronavirus cases.  USDA Monday evening reported U.S. soybean planting was 24% complete as of Sunday, slightly below a poll average estimate of 25% but still moving ahead at a fast clip. November futures have been supported by the more than $2.00 discount traded to nearby May futures.   

Wheat:  July SRW futures rose 8 3/4 cents to $7.26 3/4, July HRW gained 10 3/4 cents to $6.99 1/4 and July spring wheat was up 9 1/2 cents to $7.68 1/4. Prices are largely following the soaring corn prices as they boost demand for wheat in feed rations around the world. U.S. wheat remains uncompetitive on the world export market and European traders are getting more aggressive on offers for new-crop delivery. Meanwhile, U.S. winter wheat crop ratings are eroding on the dryness. The U.S. winter wheat crop is pegged at 48% “good” and “excellent”, down from 49% last week and 55% a year ago. Regional showers will impact pockets of Kansas, Nebraska, and South Dakota in the next two weeks. Soil moisture erosion will continue across the remainder of the Plains. Drought expansion also continues across the Pacific Northwest into mid-May. U.S. spring wheat planting was 49% complete as of Sunday, up from 27% last year and 32% on average the past five years.   

Cotton: Cotton futures got off to a firmer start, but quickly turned lower. Futures settled 14 to 104 points lower, with nearby contracts leading losses. Cotton futures have consolidated in recent days, with concerns about China giving the market a negative bias today. Stocks and financial markets retreated this morning in response to headlines that a Chinese military aircraft flew over Taiwan airspace. And relations between Europe and China appear to be deteriorating. On the other hand, strong economic growth prospects for the U.S. should boost demand for the fiber at a time when restrictions on cotton from Xinjiang have tightened global cotton stocks.  

Hogs: June lean hogs closed up $0.90 at $113.55 today, near the session high after hitting another contract high. The bull market run in lean hog futures rolls higher.  June lean hog futures today traded and closed higher than June live cattle futures, which suggests the hog futures are over-extended to the upside. Still, the recent solid rebound in hog futures from the June reaction lows is a sign hog futures prices may not peak until later this month. Today’s national direct average hog price was up a solid $3.46. May futures hold around a $4 premium to the CME lean hog index, with June futures around $6 above the index, suggesting prices have already anticipated further cash market strength. Cash must lead futures rallies. The rally in cash markets is pinching packer margins to levels not seen since three new plants came online in 2017.   

Cattle: Live cattle futures finished 90 cents to $2.275 lower through the December contract as the front-month June contract led losses. Feeder cattle futures ended $3.30 to $3.625 lower. June live cattle futures hit sell stops below key support levels, triggering active fund long liquidation. As of April 27, managed money accounts were net long 50,655 live cattle futures contracts. While that number has been trimmed since then, funds are still net long the market, meaning more liquidation is possible. But front-month futures are now around $6 below the cash market, and June live cattle finished at a slight discount to June lean hog futures. Both those signal cattle futures are well undervalued and due for a significant upside correction, though it may take the cash market turning higher before funds exit liquidation mode.