After the Bell: Mixed Grain Trade Ahead of USDA Reports

Posted on 02/04/2019 3:45 PM

Corn:  Corn futures closed slightly higher and in the upper third of the daily price range. March corn rose a penny to $3.79 ¼, while December was up ¼ of a cent at $4.02 ½.  The market is slow to start the week with much of Asia closed for Lunar New Year celebrations and traders waiting for Friday when the USDA will release the delayed crop production, Dec. 1 stocks and updated WASDE reports. Most are looking for the U.S. corn yield to come down about a bushel an acre. A two-bushel drop would have bullish implications. Widespread rain begins to ease drought conditions for the second-season corn crop areas of central Brazil, as planting continues to advance. Dry weather aids saturated corn fields across Argentina after above-normal rains for the past two months built surplus soil-moisture reserves. In an interview with CBS' Face the Nation that aired Sunday, President Donald Trump insisted that he is making progress in negotiations with China. "It looks like we're doing very well with making a deal with China. I can tell you this, no two leaders of this country and China have ever been closer than I am with President Xi. We have a good chance to make a deal," Trump said. There were no signs of Chinese buying during the weekend, which was a bit of disappointment but should not have been a surprise. Corn inspected for export in the week ended Jan. 31 fell to 901,214 MT from 968,585 MT a week earlier and 1.093 MMT a year ago. After the close USDA said corn used for ethanol was 454.5 million bu. in November, down from 475.7 million a year earlier. First quarter use at 1.360 billion bu. down 2.2% from 1.391 billion in 2017.

Soybeans:  Soybean futures finished with fractional to 1-cent gains, which was in the middle to lower end of today’s range. Soymeal futures dropped $1-plus, while soyoil futures ended 20-plus points higher. Neither bulls nor bears were very happy with today’s price action in the soybean market. Bears held the slight upper hand through overnight trade but seller interest dried up during daytime trade. Bulls are disappointed they couldn’t get a stronger finish. While today’s close mildly favored bulls, there’s unlikely to be any followthrough impact overnight.  Demand news was mildly supportive today. China’s two state-run grain firms, COFCO and Sinograin, reportedly bought 1 MMT-plus each of U.S. soybeans for April to July delivery late last week after U.S./China trade talks in Washington. USDA confirmed 612,000 MT of old-crop soybean buys by China this morning. But to excite traders, a lot more purchases must be confirmed, as Chinese negotiators reportedly pledged to buy another 5 MMT of U.S. soybeans during the talks. Weekly soybean export inspections showed seven shiploads (for 412,363 MT) of U.S. soybeans were inspected for export to China during the week ended Jan. 31.  South American weather limited buyer interest in the soybean market today. Forecasts signal dry areas of Brazil are in line for better rains over the next two weeks, though amounts and coverage levels will determine if the dry pattern is reversed. Needed drier weather is expected across northern Argentina during the next two weeks.  

Wheat:  Winter wheat futures closed near mid-ranges and down 1/2 to up 1 3/4 cents in quiet trading today. Spring wheat was down ¾ to 1 ¼ cents. U.S. wheat inspected for export last week rose to 440,031 MT from 367,604 MT a week earlier and 429,602 MT a year ago. Still, shipments since the start of the marketing year are down 11% from a year ago. The bottom line for a sustained rally in prices is better and consistent worldwide demand for U.S. wheat. President Trump indicated last week that China may also be ready to buy U.S. wheat as part of a new trade deal. Some of the U.S. winter wheat crop may have been damaged by cold temperatures last week and that limited selling interest in futures today, but the full extent of the damage won’t be known until March or April. Russian wheat prices continue to rise with domestic prices above export offers, suggesting a quick slowdown in Russian sales.  Wheat traders the next few days will be extra cautious ahead of Friday’s USDA first forecast on U.S. winter wheat sowings, with most looking for planting acreage to fall near a record low.   

Cotton:  Cotton prices closed lower after touching the lowest in more than two weeks. December fell 88 points to close at 72.76 cents. Cotton followed through on weakness seen Friday despite better weekly export sales announced last week. With all the talk about progress during last week’s U.S./China trade talks and possible large Chinese purchases of agricultural commodities, there was nothing mentioned about cotton business. Trading is likely to be quiet this week before the USDA releases on Friday its annual crop report for the 2018 season and the updated world supply and demand forecasts.  

Hogs:  April lean hogs closed up the $3.00 limit today and scored a technically bullish “outside day” reversal up, while the February contract gained $1.175 and June was up $1.775. Higher cash hog prices today, reported up an average of 41 cents, helped to boost the futures. Today's pork cutout value was also up solid $1.02 in the noon report, led by gains in picnics and ribs. Last week’s severe cold and wintry weather conditions prevented some hogs from coming to market, with this week’s more seasonal weather creating some better packer demand. However, slowed marketings last week will also create a bit of backlog of marketing-ready animals. Slaughter was estimated at 2.387 million head last week, down from 2.501 million a week earlier and 2.433 million a year ago. Short covering in the lean hog futures market was also featured today, following the recent strong selling pressure. Underlying support also stems from the progress last week on reaching a U.S./Chinese trade deal. However, there was apparently no talk about China buying U.S. pork last week. Still, in an interview with CBS' Face the Nation that aired Sunday, President Trump insisted that he is making progress in negotiations with China. "It looks like we're doing very well with making a deal with China. I can tell you this, no two leaders of this country and China have ever been closer than I am with President Xi. We have a good chance to make a deal," Trump said.

Cattle:  Live cattle closed higher but near midrange and feeders were sharply higher. April cattle rose 72.5 cents to close at $127.00, while March Feeders rose $1.70 to close at $144.225. Cattle futures opened higher, accelerated sharply higher before running into to light selling and backing off the day’s best levels.  Negotiated fed cattle prices traded a pinch higher last week, basically putting back on what was taken off the prior week. For practical purposes prices are in a tight trading range and even though packers slashed kills last week, partly due to sub-zero weather, they can’t break cash. This week’ cash trade looks fully steady to higher. Last week’s average of $123.87 was $2.04 less than a year ago. Market-ready fed cattle supplies have begun to seasonally tighten in the north and they will be become even tighter during the next two months, lending support to cash cattle prices. Boxed beef opened higher to sharply higher on Monday on heavy demand for light offerings.  Choice was $2.97 higher at $217.23 and Select 75 cents higher at $213.90.  The Choice/Select spread is $3.33. The cutout continues to trade above a year ago but is still expected to experience some additional seasonal weakness over the next couple of weeks. Last week’s 593,000-head slaughter should be exceeded this week after falling from 610,000 a week earlier and 613,000 a year earlier. After a brief thaw, very cold temperatures and brisk winds will return to Nebraska and Iowa this week and snow will hit the upper Plains and Midwest mid-week.

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