After the Bell: Grain, Soybeans Pause Ahead of the Weekend, Wait for Next Week's Weather

Posted on 05/31/2019 2:39 PM

Corn:  Corn futures closed lower and near daily lows, paring this week’s advance. July corn was down 9 ¼ cents to close at $4.27. That was up 22 ¾ cents this week and up 63 ½ cents for the month.  December corn fell 8 ½ cents to $4.43 ¾, paring this month gain to 62 ½ cents. It’s all about the new weather forecasts when prices reopen Sunday night. The central and western Midwest need significant dry and warm weather and that is not in the forecast going home tonight. There will be less frequent and less heavy rains the next two weeks but not dry. There is enough ambiguity in the forecast for the next two weeks that bulls took profits on longs today and may be ready to come back next week in a buying mood if the window for planting is smaller than forecast today.
Chinese-owned U.S. pork producer Smithfield Foods may already be contracting cargoes of cheap South American corn over fears of immediate logistical woes and worries about smaller U.S. production this year, according to market sources. U.S. pork sales to China already total more than 234,000 metric tons, more than 10 times higher than a year ago, with more demand to come amid an outbreak of African swine fever that is set to cut the nation's pig herd by 30%.  

Soybeans: Soybean futures closed out the week with losses of 9 to 11 cents in most contracts. Despite today’s losses, July soybean futures rallied 48 cents and November futures surged 48 1/2 cents this week. Soymeal futures dropped around $6 today, while soyoil fell 15 to19 points. The weather-induced rally in the soybean market was paused today by the unexpected threat of U.S. tariffs against Mexico. That gave traders a reason to take some profits out of the long side of the market. With forecasts calling for more rains across the Corn Belt next week, futures could resume their rally, especially if funds decide to cover more short positions. But soybeans likely need corn to lead to the upside or there’s risk of today’s pullback extending.  It doesn’t appear a trade deal with China will be finalized anytime soon and now there’s risk of a fresh tariff spat with Mexico. If the Trump administration implements a 5% tariff on all Mexican imports on June 10, Mexico will retaliate, which could include levies against U.S. soybeans and other ag products. The trade uncertainties and risks threaten to cap rally potential.  

Wheat: SRW futures dropped around a dime today and HRW contracts lost 5 3/4 to six cents. For the week, July SRW futures gained 14 1/2 cents and July HRW futures added 31 cents. Spring wheat closed about 3 to 4 cents higher this week. Grain traders today were blindsided by a new U.S. trade tariff threat against Mexico, the biggest buyer of U.S. wheat. That had the bulls scurrying for cover today after good gains earlier this week. Traders are now debating whether Mexico and the U.S can come to a quick agreement on illegal immigration into the U.S. on the Mexican border to avoid the tariffs. This morning USDA’s weekly Export Sales report showed 153,000 MT sold for old-crop and 411,800 MT sold for new-crop. Sales were better than expected. Focus next week should shift back to wet weather in U.S. wheat country, as well as what the corn and soybean futures markets are doing. Wheat this week saw spillover buying support from solid rallies in corn and bean markets.

Cotton: July cotton closed down 117 points and December was down 123 points. Both contracts closed at technically bearish weekly low closes today. For the week, July cotton lost 14 points. The cotton futures market late this week fell victim to sell off in the U.S. stock market that could impact domestic and global demand down the road. Also, the steep downdraft in crude oil prices this week was a negative psychological factor for cotton traders. Today’s weekly USDA export sales report for cotton showed net sales of 288,800 running bales (RB) for 2018-19 were down 24% from last week but 17% above the four-week average. Sales in the 2019-20 marketing year were 136,200 RB. Shipments of 410,600 RB were up 18% from the previous reporting week. Support recently came from the hot, dry weather in the Southeast that is starting to stress some crops, Forecasts for more of the same the next two weeks is likely to limit the downside in cotton futures next week.

Hogs: Lean hog futures faced heavy pressure to close out the week, with futures settling $1.575 to $2.275 lower for the day. Futures have consolidated the past four days. The market finished lower for the week, with August hogs down $2.675. Pressure today stemmed from news the Trump administration plans on tacking 5% tariffs on all Mexican goods beginning June 10 if the country does not take action to stymie the flow of illegal migrants into the United States. Mexico has pledged strong retaliation, but top officials are traveling to the U.S. for talks aimed at averting yet another trade battle. Updates on this front will be in focus next week. If not for the negative trade developments, the market may have rallied in response to weekly export sales data showing more large U.S. pork buys by China.

Cattle: cattle and feeder cattle closed sharply lower, making new lows for the month. August live cattle fell $1.975 to close at $103.075. That was down $4.875 this week and down $8.70 this week. August feeders tumbled $5.10 today to close at $122.125, and down more than $16 this month as corn prices soared. This week’s drop in futures have traders looking for lower cash prices next week after trading mostly steady this week. Beef prices were mixed this week with Midday Select down 26 cents and Choice up $2.18. The market’s weakness is excessive with August now $3 below the cash low last year and $2 below the cash low in 2017 despite much stronger beef demand.  The livestock markets were pressured by the Trump administration’s decision Thursday to raise tariffs on Mexico.


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