After the Bell: Corn Finishes Strong Week on Wet Weather, Soybeans Retreat

Posted on 05/03/2019 3:26 PM

CornCorn finished mixed Friday but near weekly highs. July futures were up ¼ cent on Friday to close at $3.70 ¾ and up 9 ½ cents this week. December gained ¾ cents to $3.87 ¾ and up 7 cents for the week.  Next week’s price action will depend on the updated weather forecasts. Going home tonight the latest model runs showed a swath of rain focuses near the Delta tomorrow, while a few showers and thunderstorms occur elsewhere through Sunday, especially the Plains and western Corn Belt. The midday forecasts today were wetter than previously through May 17 in most areas, showing 2 to 5 inches across the southern two-thirds of the central U.S., and more than that in the Delta. The heaviest of rain is shown exiting Iowa and Nebraska May 8-9, only showing some showers over the 5-7 days that follow with 3 inches of rain until the next system approaches May 16-17. Temperatures turn unseasonably cool for at least several days as the system and its rain exit from north to south over most of next week. The trade is talking only 25% of corn will be planted of Sunday, up from 15% this week. The key will be how much was planted on May 19, with some worried planting may not reach 50% completed by that date.  There are increasing reports in the media of a Chinese deal being announced late next week. Watch for any confirmation of the meeting date between Presidents Trump and Xi as a sign that a deal is done.

Soybeans: Soybean futures prices closed down 2 cents today, near their daily lows and touched new contract lows. For the week, July soybeans lost 25 3/4 cents.   Meal futures prices today were up around $1.00 in the July contract on tepid short covering after hitting a contract low Thursday. Soybean oil futures were down 13 points in the July contract and closed at a contract low close today. This was a dreadful week for the soybean market bulls. A major question early next week is, will the speculative funds extend their record short bets, or will they decide to take some profits after the two-week downdraft in futures prices. Extended weather forecasts for the Corn Belt remain bearish for beans. The National Weather Service outlook for May 8-12 signals more corn-planting delays are likely. Its six- to 10-day outlook calls for cool temperatures across the Plains and the Midwest, with the exception of Ohio and southeast India, where warmer weather is anticipated. The precipitation outlook says more rain is likely headed for the eastern Corn Belt that was hit with heavy rain and flooding this week. More than 100 Chinese officials are headed to Washington next week for what could be a concluding round of talks to get a trade deal completed. Until there is signed accord, the trade remains skeptical soybeans will benefit much, at least for boosting old-crop demand.

Wheat: SRW wheat futures today lost 5 to 6 1/2 cents, while HRW futures were steady to down 3 3/4 cents in the nearbys. For the week, July SRW lost 4 3/4 cents. July HRW was down 6 cents on the week. September spring wheat futures fell 6 ¼ cents today to close at $5.23 but up 2 cents for the week. The bears will start out next week with the overall advantage from fundamental and technical perspectives. Prices are on the retreat partly due to rains in Europe and the Black Sea region this week and more in the forecast. Charts show prices remain in solid near-term downtrends. However, U.S. weather remains wet and cold, increasing yield risks for SRW wheat and delaying planting of spring wheat.  Underlying pressure in wheat futures stems from confirmation of big HRW crops in the making. The annual Wheat Quality Council crop tour found record yield potential in Kansas. Larger crops were also measured in Oklahoma and Colorado. Since emerging from its winter dormancy, Kansas wheat has flourished, with above-average moisture and mild weather fostering development. But most of the crop is still weeks away from reaching full maturity and still vulnerable to hot weather the next six weeks. Later next week will see some positioning ahead of the Friday USDA monthly supply and demand report and the first estimates on winter wheat production and U.S./global supply and demand for the 2019-20 season.

Cotton:  Cotton futures moved slightly higher today, paring weekly losses. July rose 23 points to close at 75.68, down 202 points for the week. December gained 3 points today to 74.45 and down 179 for the week. The market’s weakness is likely to continue early next week. Improved soil moisture across Texas is expected to increase yield potential and reduce acreage abandonment. However, too much rain in the Mid-south may end up reducing planted acreage.  More than 100 Chinese officials are headed to Washington next week for what could be a concluding round of talks to get a trade deal completed. That could be a positive factor for the cotton  The export side of the market has been struggling for new sales, but that’s the normal seasonal slowdown. Shipments are the real problem. Shipments need to average more than 400,000 bales a week. USDA may be overstating annual shipments.  

Hogs: June lean hogs lost 20 cents today, while the July contract gained 12 1/2 cents. For the week, June hogs gained $2.425. This week was not a bad week for the hog market bulls, amid higher volatility that included a limit price move in futures on Wednesday. Expect some more volatility in the lean hog futures market next week. Traders will be keenly focused on next week’s U.S./China trade talks. Thursday, traders ignored a disappointing weekly USDA export sale on speculation Chinese demand will improve. Cash hog bids dropped $1.50 on Thursday, which is weighing on nearby contracts. However, it appears the belly market has bottomed out and that will provide support for the cash market going into the summer.  Pork cutout values this week fell below the CME lean hog index for the first time since last June, pushing packer margins into the red. For summer hog futures to make a full recovery back to contract highs, the cash market would have to lead.  

CattleCattle closed lower and near weekly and daily lows. June cattle fell 25 cents today to $113.425 and down $1.625. October fell $1 to $109.675 on Friday and down $3.75 for the week Total cattle open interest peaked April 23 at 451,531 contracts and this morning is reported at 411,293 contracts, so some of the pressure from record fund long positions has been relieved. The market has fully anticipated a larger-than-normal seasonal break. One positive thing that this break accomplished was to motivate cattle feeders to sell cash cattle cheaper. Lower cash cattle costs have inspired aggressive fed cattle demand from packers. This week’s negotiated trade volume may top 140,000 head as packers load up and plan to run plants hard.  The cutout may be sloppy, but packer margins have expanded and formula values for wholesale beef are generally calculated using a three-week trailing moving average. This means the high prices reached last week will be reflected in sales realizations for a while. Futures remain grossly oversold and markets always find a way to correct. June’s relative strength versus other contracts could be reflecting the fact that packers see “value” in cash cattle prices at these levels, at least for this month.   

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