After the Bell: Corn Continues Weather Rally, But Soybeans Retreat on Potential Large Aid Plan

Posted on 05/21/2019 3:03 PM

Corn: Corn futures finished with gains of 5 to 6 cents in most contracts, though slightly lesser gains were posted in far-deferred months. Futures closed above opening levels but just mid-range for the day. Corn futures gapped higher overnight after USDA reported corn planting was just 49% complete as of Sunday. With the optimal corn planting window closing quickly, a wet forecast for the next week to 10 days, especially in the western Corn Belt and half of the crop left to plant, acreage and yield expectations are declining. With the planting woes and wet forecast through next week, funds continued to actively cover short positions. Funds have aggressively trimmed their short exposure since the contract low and key bullish reversal on May 13, but are still short, leaving the door open to more near-term upside potential. The upside remains tied to weather and fund activity – two extremely volatile factors.  

Soybeans: Nearby soybean futures closed down just over a dime and near daily lows today. Meal futures were off around $2.00 and bean oil futures were down 36 points in the July contract. The soybean futures market was rattled at midday after Bloomberg that said the Trump administration is considering, in light of the U.S.-China trade war that has hurt U.S. ag markets, an aid plan for U.S. farmers that includes a $2.00-per-bushel government payment for soybean growers. If realized, this plan would very likely mean U.S. farmers would plant as many soybean acres as they can, even if it’s very late in the planting season. Still, given the soybean market’s only moderate selling pressure today in light of what would be a very bearish development if realized. Traders want know how the payments will be made whether based on historical planting or 2019 acreage and the dollar amount will come to fruition.U.S. soybean planting advanced just 10 percentage points last week to 19% complete, upping the odds that more than half the crop will be unplanted in May. That ups the odds for prevent-plant soybean acres and reduced yields. Just 5% of the U.S. soybean crop has emerged, which compares to 17% on average and 24% last year at this point.    

Wheat: Winter wheat futures gained ½ 1 1/2 cents today pulling back from gains of 13 to 18 cents, that saw SRW hit a three-month high and HRW notch a seven-week high early. Spring wheat futures closed down1/2 to 1 ¼ cents.  USDA surprised wheat traders once more by raising the amount of winter wheat rated in “good” to “excellent” condition by two percentage points to 66%. But the limited selling pressure in winter wheat futures today signals traders believe the wet weather will cause some quality issues with the SRW crop. USDA also reported Monday afternoon a stronger-than-expected surge in spring wheat planting last week to 70% complete, which is “just” 10 points behind the five-year average.Strong gains in corn recently continue to support the wheat futures markets.

Cotton: Cotton futures closed lower and near session lows. July cotton fell 59 points to 67.32, while December fell 75 points to 66.90 cents. The market was pressured today by major retail companies reporting sales below estimates, suggesting a possible slowdown in clothing sales. Some of that is clearly the result of the wet, cold and snowy weather the past quarter but it helped to keep the market worried about Chinese demand for cotton to make those clothes, especially with the higher U.S. tariff threats without a new trade accord. U.S. cotton planting picked up over the past week, with USDA reporting 44% of the crop had been seeded as of Sunday, just a point behind the five-year average pace.  

Hogs: Lean hog futures posted modest losses for much of the day, but the market extended losses heading into the close. Futures settled $1.60 to $1.975 lower through the October contract, with deferred months posting smaller losses. Price action in the lean hog market this week signals traders are far more focused on the U.S/China trade spat than Mexico’s lifting of tariffs on U.S. pork. It’s a bit surprising the lifting of these duties did not garner more attention considering Mexico is the top buyer of U.S. pork, while China is only our fifth biggest market for the meat. But African swine fever has been a major market attention-getter and is expected to force China to bring in a lot of pork and other meat. If it buys that meat from producers other than the United States, the resulting trade shifts should still benefit U.S. producers to some degree.

Cattle: Fed and feeder cattle futures started steady to higher but closed lower and in the bottom third of the daily price ranges. June cattle fell 50 cents to $110.85, with August down 25 cents to $108.275. August feeder cattle fell $1.775 to $143.  Mixed beef prices at midday and talk that packers will be trying to bid lower again for cattle this week are keeping the fed cattle market under pressure. Weakness in hog futures and strength in corn prices also added to a negative tone in slaughter and feeder cattle futures. However, cash cattle prices this week have a chance to be fully steady as packers last week, for the first time in months, were unable to buy enough cattle to prevent them from pulling from their own inventories. 

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