After the Bell: Grain Rally Pauses But Rain Delays Will Lend Underlying Support

Posted on 05/15/2019 3:36 PM

Corn:  Corn futures closed slightly higher, giving back most of the early 10-cent gains. July corn closed up ¾ cent to $3.69 ½, with December up 1 cent at $3.88 ¾. The corn market surged another dime to the highest since March 31 this morning, before giving back most of the day’s gains by the close. Prices were supported by rising risks that rain-delayed planting will trim both planted acreage and reduce yield potential for this year’s Midwest crop. At today’s high, futures had risen more 37 cents since printing new contract lows on Monday. The midday weather forecast was slightly drier for parts of Iowa but otherwise remains wet for the next two weeks, with three separate storms forecast to move through the central U.S. The forecast was enough to encourage some light long profit taking this afternoon after funds were estimated buyers of another 45,000 contracts earlier today.  

Soybeans: Futures closed higher but in the bottom half of the day’s range. July beans were up 4 cents at $8.35 ½, and November rose 3 ¼ cents to $8.59 ¾. July meal rose $1.80 to close at $299.80. The short-covering rally in soybeans stalled today as the rally in corn paused.  The market should find buying interest on near-term setbacks with the rain-delayed planting progress providing light support. But the market remains burdened by record U.S. and global inventories that remain a buffer for any minor production cutbacks in the U.S. Prices were also pressured by reports Chinese crushers have been buying multiple cargoes of Brazilian beans this week. While that pushed up the export prices in Brazil to large premiums to U.S. values, it doesn’t mean a strong uptick in U.S. business is on the horizon

Wheat: SRW futures closed steady to 1 1/4 cents lower in the nearbys, while HRW contracts lost around 6 cents. Prices closed near session lows after hitting four-week highs early on. Today’s low-range closes were disappointing to the bulls and they now need to step up yet this week and show renewed strength that would suggest the gains so far this week are more than just short covering in a bear market. The speculative funds continued to cover their short futures positions today. Some sources estimate as of yesterday’s close funds were still net-short 78,000 futures and options contracts of SRW wheat. There are some signs of improving overseas demand for U.S. supplies. Australia will import its first shipment of wheat in more than a decade as a drought across the country's east coast reduces supply in the world's fourth-largest exporter.  

Cotton: July cotton closed down 41 points today, with the December contract losing 10 points. Prices closed near mid-range in quieter trading. Cotton traders are wondering if the recent steep downdraft in futures prices has now factored in all of the bearish U.S.-China trade news and a market bottom is in place, or if the market is just pausing and more price pressure is coming. Price action the rest of this week could help determine the answer. Closes on Friday at or near their weekly highs would be a clue market bottoms are in place.

Hogs: June lean hogs gained $2.75, while the July contract rose $1.82. Prices continued their strong rebound today after hitting a two-month low on Monday. The hog market continues to see underlying support from the uncertainty of the situation with African swine fever in China, and its longer-term ramifications on world meat supplies. China's sow herd fell by 22.3% in April compared with the same month a year ago, the Ministry of Agriculture and Rural Affairs said. The overall pig herd fell by 20.8% from a year earlier.

Cattle:  Live cattle futures were slightly higher and feeder cattle closed slightly lower. June live cattle were up 17.5 cents to $109.675 and October gained 27.5 cents to $106.75. Feeders fell 7.5 to 35 cents.  Prices were under pressure much of the session with cash cattle trading mostly $2 to $3 lower this week. But futures are deeply discounted to the cash market and that helped futures prices firm by the close. It was another day of mixed wholesale beef trading at midday with Choice up 41 cents and Select falling 50 cents. Sales were moderately active, suggesting the drop in prices has helped to spur better demand. Talk that packers have another big Saturday kill scheduled also raised hopes that live cattle supplies will remain very current even with the larger production levels.

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