After the Bell: Grains, Soy Waiting on Tuesday's USDA Supply & Demand Report

Posted on 04/08/2019 2:40 PM

Corn: Futures closed lower and near session lows on Monday. May futures fell 2 ¾ cents to $3.59 ¾ and December declined 1 cent to $3.89. After some recovery last week, the market resumed its bearish trend, looking for USDA to adjust its ending-stocks forecast to up near 2 billion bushels in Tuesday’s monthly supply and demand update. That’s based on the much-higher-than-expected corn stocks figure as of March 1. The jury is still out on whether the 92.8-million-acre prospective seedings figure will be attained as weather forecasts for much of the Corn Belt have deteriorated, with this week looking cold and wet and some snows targeted for the upper Midwest. That increases the specter of a late start to the planting season that could result in some intended acreage not getting in the ground and pushing corn pollination into the hottest part of the summer. There is some increased talk that total U.S. prevent- plant area could rise to 5 or 6 million acres, with corn accounting for a large share. Weather is becoming a bigger market focus for funds sitting on large net-short positions. Funds increased net-short positions more than 43,000 contracts to 246,735 futures and options as of April 2, the most ever for this time of the year. St Louis loading points are closed through at least Wednesday because of flooding following 2-inch rains over portions of the Midwest during the weekend, and more later this week will add to shipping delays.  Corn inspected for export fell to 1.035 million metric tons (MMT) from 1.259 MMT a week earlier and about as expected, USDA said this morning in its weekly report.  

Soybeans: Soybean futures saw back-and-forth price action today, strengthening in the early hours of the day session, only to see sellers return to close out the day. Futures settled low-range and fractionally to a penny lower. Soyoil posted losses of 23 to 28 points, while soymeal firmed $1.10 to $1.20. Soybean futures strengthened early this morning as U.S./China trade reports have generally been positive and weekly soybean export inspections came in near the upper end of expectations. Soybean shipments have recently made up some ground after a very slow start to the year (due to U.S./China trade tensions). But the recent string of seasonally strong tallies must continue to keep USDA’s export projection within reach.  Traders are also gearing up for USDA’s monthly Supply & Demand update tomorrow that is expected to show old-crop carryover at 898 million bu., little changed from March but still a very high stocks figure.  Buying has also been limited to some degree by the wet forecast for the next week or two. Planting delays would increase the odds soybeans will pick up some intended corn or spring wheat acres.  

Wheat:  Winter wheat futures prices ended the day mixed, with SRW futures down 2 1/4 to 4 cents in the nearby contracts and HRW futures up 1/4 cent to down a penny in the nearbys. Spring wheat futures closed ½ cents lower to up 1 ½ cents. Spring wheat futures led to the upside today after dropping more than 30 cents last week. Futures spreads became out of line and that also encouraged some light buying in the Minneapolis market. Wheat traders are watching a major winter storm heading for the Northern Plains at mid-week. Colder temperatures are set to follow the storm, with some sub-freezing levels expected in Kansas and Oklahoma that could cause some minor damage to the crop after recent warm weather pushed development. Russian wheat exports fell almost 20% in the first two months of this year, opening more potential business for U.S. wheat before the next harvest. However, concerns regarding increased supply and competition from Canada have arisen, as farmers there switch from planting canola to sowing more spring wheat this year. U.S. wheat inspected for export rose to 538,808 MT last week, up from 454,287 MT a week earlier and 418,424 MT a year ago. Still, the current weekly U.S. export sales pace is not on track to meet USDA's marketing-year projection.

Cotton: Cotton futures close higher and near session highs. May rose 67 points to 78.92 cents and December futures gained 27 points to 77.16 cents. Ever since the March 29 USDA Prospective Plantings Report showed 2019 acreage would be half a million acres less than market expectations, prices have been rising. The smaller acres did help to spur Chinese government buyers and they were looking for U.S. styles. Yet, cotton supply may still exceed demand in 2019-20. Additionally, growers have aggressively contracted cotton with merchants, but have delayed pricing those sales. We also are looking to price 2019 cotton on spring rallies.  U.S. export sales last week were 473,200 bales for both old and new crop. Equally impressive were weekly shipments of more than 410,000 bales. This brought shipments back in line with USDA’s projected export target of 15.0 million bales.  Sales were made to some 17 countries last week, a good barometer of demand. China bought 59,000 of old-crop cotton and 118,000 of new-crop.  Adding to old-crop bullishness are worries about a short-squeeze developing in the futures market.  Old- crop on-call purchases (requiring the selling of contracts) are very limited, while old-crop on-call sales ratio to purchases for July (requiring the buying of futures) are some 8 to 1. Cotton registrations fell another 7,256 (98-lb bales) to 32,089 bales, down from over 128,000 bales a month ago.  

Hogs: Lean hog futures ended 42 1/2 to $1.55 cents lower through the August contract. Mild gains were posted in some of the extreme deferred contracts. Traders took some profits out of the long side of the market to open the week. April hogs finished in line with the cash index, which isn’t surprising with contract expiration on Friday. The big premiums summer-month futures hold to the cash market encouraged traders to take profits, especially with the cash market weaker to start the week. The national direct cash hog price dropped $1.11 this morning. A temporary pullback in cash prices wouldn’t be overly surprising, as the spring low came earlier than normal and the recent price surge was stronger than most years. But the overall seasonal trend in cash prices should be higher into mid-summer. But much of the seasonal strength is already built into futures, with the June contract nearly $20 above the cash index.    

Cattle: Live cattle futures prices finished the day down 32 1/2 cents in the April and up 15 cents in the June. Feeder futures ended up 62 1/2 cents in the April contract and up 70 cents in the May. Cattle traders are closely watching the development of a potentially major winter storm set to hit the northern Plains states at mid-week. The storm could impact animals coming to market later this week and also affect weight gains in the near term. Monday kicked off the delivery period for April live cattle futures. Wholesale beef prices today extended last week's gains. Choice grade was up $2.20 and Select gained 30 cents. Movement was modest at 63 loads. Cash cattle trade averaged $125.30 last week, down around $1.00 from a week earlier. We look for firmer cash cattle trading to take place later this week, what with the outdoor grilling season set to get underway.  

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