After the Bell: Grains , Soy Retreat as Bearish USDA Forecasts Lead to Carryover Selling

Posted on 09/13/2018 3:31 PM

Corn: Futures hit new contract lows today, finished low-range and were down 1 3/4 to 3 3/4 cents. Today’s follow-through selling pressure after strong losses Wednesday set the stage for a fresh leg down in prices in the near term. Funds were heavy sellers Wednesday and continued to sell today on speculation that big crops will get bigger. In six of the nine years since 1999 when USDA raised yields from August to September, the yield got bigger by the final government tally. U.S. corn exports in the week ended Aug. 6 were 774,200 MT, down from 1.033 MMT a week earlier and below the 800,000 MT to 1.2 MMT forecast by traders. USDA’s daily export reporting service showed 142,876 MT sold to Costa Rica for 2018-19 season. Warm, dry Midwest weather for at least the next week should advance U.S. corn harvesting, boosting supplies to the market.

Soybeans: Soybean futures prices finished down more than 6 cents and near session lows. November soybeans closed down 6 ¾ cents at $8.33 1/4. Meal prices were down $3.10 to $3.50 and bean oil was down around 20 points. The markets traded both sides of unchanged, but resumed their bearish slide tied to record U.S. supplies forecast by USDA yesterday. The national average yield estimate of 52.8 bu. per acre is up 1.2 bu. from August and 0.6 bu. higher than anticipated. Record yields are expected in 10 states. While USDA certified acreage data on Thursday indicates acreage may have to come down 700,000 acres from yesterday’s forecast, that may be made up with higher yields. When USDA increased its yield from August to September in 10 of the last 20 years, the final yield was higher in seven of those years Soybean futures remain about 14 cents above the new contract lows set yesterday on news the U.S. has asked China to return to the negotiating table for new trade talks. Traders in the coming days will closely monitor updates on this important matter, but the bears want to see actual meetings planned before jumping to the sidelines.

Wheat: Wheat futures faced followthrough selling today, with the SRW market leading to the downside. SRW wheat settled 8 ¼ to 10 cents lower, HRW wheat ended between 5 and 6 cents lower and HRS wheat futures posted losses of 3 cents. Traders were highly disappointed by USDA’s 3-MMT increase to its Russian wheat crop estimate yesterday, which signals Russia will remain a major competitor on the export front even farther into the marketing year. That weighed heavily on the wheat complex yesterday and futures faced followthrough selling and long liquidation today. Another lackluster showing in the Weekly Export Sales Report added insult to injury. European wheat prices also extended losses in reaction to the USDA data today. There were some smaller wheat crop estimates for the European Union and Australia overnight/this morning, but the market was unwilling to shake bearish attitudes.

Cotton: Cotton futures closed lower and near session lows. Futures were 83 to 124 points lower today. The market continued on the defensive today after USDA raised its U.S. cotton crop estimate on Thursday by 447,000 bales from a month earlier on higher harvested acreage. Also, exports sales in the week ended Aug. 6 were down 11% from a week earlier and 36% below the prior 4-week average. Shipments of the fiber also fell 27% below the 4-week average. While traders are monitoring the projected path of Hurricane Florence, the storm’s downgrade today is likely to limit its impact on a non-major cotton-producing area. A second round of tariff-related aid to U.S. cotton farmers could be announced in December, according to the USDA on Thursday. USDA did not indicate how much money could be directed to farmers, or how such funds would be split up.

Hogs: October lean hog futures closed up 15 cents, while the December contract was up 47 1/2 cents. Prices finished near their daily highs. Bullish fundamentals are at work in the hog market, at present. USDA’s monthly supply and demand report Wednesday reminded that pork exports have been and are expected to remain record-strong. Traders are watching African swine fever developments in China. Most recently, China banned the use of food waste as pig feed in provinces where outbreaks have occurred. The use of pig blood as raw material in producing feed has also been banned. This matter is an underlying bullish element for hog futures, and could become a major factor in the coming weeks—if the disease continues to spread. Meanwhile, North Carolina’s hog processing industry is bracing for Hurricane Florence.  Today's midday pork report showed cutout value up 65 cents with solid gains in ribs and bellies.

Cattle: Live cattle futures ended split, with nearby contracts down 12 ½ to 67 ½ cents and deferred months up 40 to 47 1/2 cents. The market traded in a wide trading range before settling high-range. Feeder cattle futures settled high-range and up 25 to 75 cents. The trend of the live and feeder cattle markets favor market bulls, and today these markets saw a mix of followthrough buying and profit-taking after yesterday’s strong gains. Traders were encouraged by the December live cattle contract’s ability to respect support at the 40-day moving average again today. Traders have a friendly bias toward this week’s cash action given reduced showlist numbers and strong packing margins.


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