After the Bell: Soybeans Leads Corn Lower on Big South American Crops and Strong Dollar

Posted on 04/17/2019 3:22 PM

Corn: Corn futures closed fractionally to a penny lower and near mid-range today. Bulls are in desperate need of a shot of bullish fundamental news. Maybe that will come with Thursday’s weekly USDA export sales report, but traders are not betting on it. That report is expected to show corn sales in 2018-19 at 500,000 to 850,000 MT, and at zero to 100,000 MT for the 2019-20 marketing year. U.S. export sales need to pick up the weekly pace to meet USDA's projections on U.S. corn exports. Open interest rose by 23,000 contracts on Tuesday’s futures price drop. That signals funds were willing to add to record short bets on speculation rising South America production will make U.S. exports more difficult into the summer, especially given the dollar’s surge against the Brazilian and Argentine currencies. Weekly ethanol production rose 14,000 barrels per day (BPD) to 1.016 million BPD this week, according to data this morning from the Energy Information Agency. Ethanol inventories dropped 517,000 barrels to 22.68 million. However, overall inventories remain near recent records. Light rains will move across the Midwest today and will continue through Friday before a clear and warmer weekend. More rains are likely early next week. The forecasts are more uncertain after April 24 and for early May. Traders are not giving the weather outlooks a bullish read, at present.  

Soybeans: Futures opened slightly lower and closed making new session lows. May futures fell 9 cents to close at $8.79 and November futures fell 8 ¾ cents to $9.12 ¼. Prices fell today on reports of increased Chinese buying of Brazilian soybeans and maybe some Argentine supplies. A weaker Brazilian currency against the U.S. dollar and chart-based selling added to the weakness. News at midday the U.S. and China may have a deal by June triggered a very short and minor bounce before prices headed for new lows at the close on concerns the benefits of a trade deal continue to be delayed. The U.S. and China have tentatively scheduled a fresh round of face-to-face meetings as they seek to close out a trade deal, with negotiators aiming for a signing ceremony in late May or early June, a person familiar with the situation told the Wall St. Journal today. U.S. Trade Representative Robert Lighthizer is tentatively set to travel to Beijing the week of April 29 with Chinese envoy Liu He coming to Washington the week of May 6, according to the WSJ.  Soybean meal fell about $3 today despite talk that Argentina soybeans are yielding lower protein content. According to cash sources that could help to boost demand for U.S. soybean meal, especially from European feed manufacturers.

Wheat: Winter wheat futures finished 1 to nearly 4 cents higher, with HRW contracts leading gains. Spring wheat futures finished fractionally to a penny-plus higher. Wheat futures only partially bounced back from Tuesday’s selloff amid light corrective buying. But aside from the mild corrective buying, the upside was limited as supportive news remains lacking. Until there’s a bullish catalyst, funds will remain quick to defend their aggressive short stance, which limits the upside. Weekly export data tomorrow is expected to show old-crop sales of 200,000 to 400,000 MT and new-crop sales of 150,000 to 300,000 MT. With a combined figure above 700,000 MT needed to top the upper range of the pre-report estimates, it is unlikely the data will be bullish. World weather/crop concerns are limited. With demand not being price-supportive, a global weather/crop scare is likely needed to spook funds out of their rooted short stance.    

Cotton: May cotton futures closed up 27 points today, with the July contract gaining 43 points. Prices closed near their session highs. The cotton futures market today was lifted in part by news China’s economy grew 6.4% in the first quarter of 2019 versus a year earlier, which was a bit higher than expected. Fixed asset investment grew by 6.3%, retail sales were up 8.7% and industrial production grew by 8.5% in the period, showing improvement in the economy. The latest figures suggest Beijing’s stimulus measures are starting to boost the Chinese economy, including possibly more demand for U.S. cotton in the coming months. DowJones Newswires today reported the U.S. and China are tentatively set to sign a trade deal as soon as late May, with U.S. Trade Rep. Lighthizer traveling to Beijing for the next round of talks on April 29. There is also speculation President Trump could meet with China President Xi Jinping in Japan in May. Traders are awaiting Thursday morning’s weekly USDA export sales report. Domestic demand is set to fall to a record low this year, so every Thursday the market will key off the weekly export data. Sales and shipments have been improving the last several weeks and traders are looking for another good week.

Hogs: Hog futures ended mixed with June down $1 to close at $97.125 and October 2019 through August 2020 up 35 cents to $1.15. The front of the futures market was soft on worries it may be June before the U.S. and China sign a new trade deal that lifts excessive tariffs on U.S. pork shipments, while deferred futures rose on optimism a deal will be signed. China would likely lift a ban on U.S. poultry as part of a trade deal and may buy more pork to meet a growing supply deficit, two sources with knowledge of the negotiations told Reuters. The front contracts did bounce off session lows as midday pork prices jumped $1.89, to $88.42, exceeding last summer’s seasonal high. That’s up nearly $30 from the 10-year lows hit in February and signals further gains in the cash market, which must lead rallies given the premiums in the futures. Focus tomorrow will be the weekly USDA export sales report for the week ended April 11. Chinese pork prices are set to jump 70% in the second half of the year, a senior government official warned after data showed an outbreak of African swine fever cut the world's largest hog herd by 10% in the first quarter. China's pork production fell 5% in the first three months of 2019 and much bigger declines are expected in coming quarters.

Cattle: Live cattle futures ended split with nearbys down 35 to 60 cents and deferred months slightly higher. Summer and fall contracts climbed to new highs for the month. Feeder cattle delivered a similar performance, with spring contracts softening and fall contracts strengthening. Traders engaged in some position evening for the monthly Cattle on Feed Report today. The report will be released after the market closes Thursday and the markets will not be open Friday. Analysts surveyed by Reuters expect the number of cattle on feed as of April 1 to climb 1.7% from year-ago and for placements to rise 3.4% from last year at this point in the season. Also of note, cash cattle trade reportedly got underway around $126 in Kansas and Texas today, which is up $2 from the bulk of trade in these states last week. There have also been some light sales farther north at steady prices of $127 to $129. April futures are trading in line with these cash price levels, which limited any bullish price response to the steady to higher trade.

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