After the Bell: Mixed Finish Amid Neutral to Friendly USDA Grain Forecasts

Posted on 02/08/2019 3:20 PM

Corn: Corn futures finished low-range with losses of 1 to 2 1/4 cents after volatile 7 ¾ trading range. March corn was down 2 ¼ cents to close at $3.74 ¼ cents. March fell 4 cents and closed at the lowest weekly finish since late November. Global ending stocks for 2018-19 were increased 980,000 metric tons (MT), but are still projected to fall 9.1% from 2017-18. However, the Argentine corn crop estimate was raised 3.5 million metric tons (MMT) to 46 MMT. The higher-than expected global ending stocks forecast was the main driver of today’s selling after prices rose on smaller U.S. supplies. Favorable weather forecasts for South America mean big crops and more competition for U.S. corn in the second half of the marketing year. Dec. 1 corn stocks in all positions came in 140 million bu. below the average pre-report trade estimate. Implied disappearance in the first quarter of the 2018-19 marketing year was 4.61 billion bu., up 6.2% from the same quarter in the previous year. USDA’s final 2018 corn crop estimate of 14.420 billion bu. was was 112 million bu. below the average pre-report trade estimate.

Soybeans: Nearby soybean futures prices closed up 1 1/4 to 3 1/4 cents in the nearby contracts today. Meal futures were up around $1.00 and nearby soybean oil futures prices finished near steady. For the week, March soybean futures lost a penny. Look for more choppy and sideways trading in the soybean market next week. Today’s highly anticipated USDA reports failed to provide much of a spark for the grain markets, including soybeans. USDA's final 2018 soybean crop estimate of 4.544 billion bu. was 25 million bu. below the average trade estimate. USDA's carryover projection of 910 million bu. is down 45 million bu. from the last report. Global soybean carryover was cut 8.61 MMT, but is still projected to rise 8.8% from 2017-18. Critical trade talks in Beijing occur next week as U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead the U.S. contingent.

Wheat:  Soft red winter wheat futures prices closed up 4 3/4 cents in the March contract and near mid-range, while March hard red winter futures lost 1 3/4 cents, hit a three-week low and closed at a bearish weekly low close. The USDA today reported U.S. farmers planted 3.8% fewer winter wheat acres than a year ago--the second smallest ever, but that failed to inspire much buying interest in the futures markets. Wheat prices found some support after Egypt's state buyer bought 2 cargoes of SRW, confirming U.S. offers are competitive even with higher shipping costs. More demand for U.S. wheat needs to surface in the coming weeks, for the futures markets to sustain price uptrends. It will take time before USDA is caught up on delayed sales. Cash basis for spring wheat is rising and rail demand for supplies in the PNW is improving. Dryness is just beginning to develop across the Northern Plains ahead of planting.

Cotton: Cotton futures extended this week’s decline to the lowest in three weeks. March futures fell 26 points to close at 72.55, after touching 73.45, the lowest since Jan. 16. Prices were down 109 points this week.  Prices may continue under light pressure next week after USDA raised its global ending stocks projection 2.31 million bales, to 75.5 million on Friday. That was above pre-report trade estimates for a drop to 73.02 million but still a decline 6.8% from 2017-18. Lower prices will likely spur new overseas demand for U.S. cotton after the president of the Cotton Association of India told Reuters Thursday that imports are likely to jump 80% from a year ago because production could fall to the lowest level in nine years. Higher imports by the world's biggest cotton producer could support global prices trading near their lowest levels in more than a year. The drop in Indian supplies should boost demand for U.S. fiber.  The next 90 days may be dominated by the path of the U.S./China trade talks. Export demand from China, India and other consumers will be closely monitored.

HogsFebruary lean hogs today closed down 22.5 cents at $55.05 and hit a nearly six-month low. April and June contracts also hit six-month lows and closed down $1.225 and $1.10, respectively. For the week, April hogs lost $1.775. Steep losses most of this week, including Friday’s technically bearish weekly low close is likely to lead to some follow-through selling pressure in hog futures early on Monday. However, the market is now technically oversold and due for a corrective bounce—likely to occur early next week. Larger hog slaughter levels so far this year continue to hamstring the futures market. Weakness in pork prices continued to be led by sharp losses in bellies. Fears the U.S. and China won't get a trade deal in place by the March 1 U.S.-imposed deadline also pressured hog futures late this week.  

Cattle: Live cattle futures ended the session sharply higher and near contract highs set last week.   The April contract jumped $1.10 to $127.925. March feeder cattle futures closed up 85 cents at $144.10 and the May feeders gained $1. Talk of $1 higher cash cattle or more boosted buying in the futures today. Packers need inventory after slaughter this week rose to 614,000 head, up from 589,000 a year ago and up from 593,000 a week ago.  That should help to start cash markets firm next week and keep market participants interested in buying breaks in the cattle futures. USDA’s monthly WASDE report on Friday cut the agency’s estimates of beef, pork and chicken production for 2019 from the December estimates. Smaller total supplies of meat are bullish. If the U.S. economy continues to add to the employment rolls, the demand outlook should remain strong into the summer grilling season. 

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