After the Bell: Pause in Corn Rally

Posted on 06/03/2019 3:55 PM

Corn: Futures prices closed down 3 to 4 cents today and near their daily lows as the market pauses from the recent strong rally. The two-session pause in the rally and steep uptrend is not surprising and even can be considered healthy for the market, following the biggest monthly price gain in corn in nearly four years.  The corn market weather rally has stalled in part because President Trump has proposed tariffs on all goods imported from Mexico because of the flow of illegal immigrants. Mexico can reach an agreement with the United States to resolve the dispute over migration, Mexican officials said on Monday as high-level talks were set to begin in Washington.Losses in corn futures were limited by solid gains in the wheat market today. Corn inspected for export totaled a disappointing 743,077 MT for the week ending May 30, down from more than 1.1 MT a week earlier and 1.556 MT a year ago. Mexico was the top destination.

Soybeans: Futures ended mixed to slightly higher but down from early session highs. July soybeans close up 1 ¼ cents to $8.79 and November up 2 ¼ cents to $9.06 ½. July meal fell 80 cents to close at $320.50 and July soybean oil futures fell 25 points to 27.34 cents.  With farmers making some progress planting crops, the soybean markets struggled to hold gains even with planting running at one of the slowest rates on record. Traders are looking for USDA’s weekly Crop Progress Report to show about 41% of the crop planted as of yesterday, up from 29% planted a week ago.  U.S. soybean crushers used 171.6 million bu. in April, above the 170.0 million bu. expected by traders. That was down from a 179.4 million-bu. crush in March and equal to a year earlier. Soybeans inspected for export last week fell to 498,771 MT from 535,183 MT a week earlier and 573,294 a year ago. China shipped 334,290 MT last week. It was good news to see China ship beans last week amid the rising trade rhetoric.  

Wheat: Wheat futures finished 15 to nearly 17 cents higher in SRW contracts, 12 to 14 cents higher in HRW contracts and 11 to 12 cents higher in HRS contracts. Futures closed high-range but off session highs. Wheat futures were supported by weather concerns today. More heavy rains are forecast for U.S. winter wheat areas of the Plains and Midwest in the seven-day outlook. Traders are starting to factor in some yield and quality losses amid the persistent late-season rains. Meanwhile, dryness is a growing concern in areas of Russia and Ukraine, along with portions of the Canadian Prairies. Weather gave funds a reason to cover more short positions. As of May 28, managed money accounts were short just over 23,000 contracts of SRW wheat, 40,000-plus contracts of HRW wheat and 12,000-plus contracts of spring wheat. Weekly wheat export inspections were at the top end of expectations at 592,744 MT.

Cotton: Cotton futures opened under pressure and pushed to their lowest level in more than a week before uncovering some buying interest. Futures settled high-range and 80 to 134 points higher on the day. West Texas continues to receive frequent rains and weather watchers are calling for some relief from heat and dryness in the Southeast this week, which bolsters already high expectations for the 2019 crop. Traders are anticipating bigger crop pegs and smaller export forecasts from USDA going forward. This weighed on cotton futures this morning, but traders displayed some unwillingness to push the market under uptrending support drawn off the lows since mid-May. A breakdown in the U.S. dollar index today was also encouraging of some short-covering and helped the market to finish high-range.

: Hog futures were lower to sharply lower on Monday, setting new 10-week lows. August hogs fell $2.10 to close at $84.525 and December futures dropped $1.95 to $75.825. The contra-seasonal weakness continued to start the new trading month, suggesting much of the weakness reflects speculative long-liquidation and new technical selling. Growth in the U.S. manufacturing sector is slowing. This morning’s purchasing managers index fell to 50.5 in May, down from 52.6 in April. Exports are slow and backlogs are contracting, worrisome signs for job trends going forward and domestic meat demand. Negotiated purchase totals were light to very light and mostly lower. Packers haven’t had to work hard to get needed cash hog supplies for weeks.  The market has given up on potential export demand with the Trump administration planting more tariffs on the China and Mexico, the two biggest markets for U.S. pork. 

Cattle: Live cattle futures closed down 20 cents in the August contract, with October down 37 1/2 cents. Both closed at contract low closes today. Meantime, August feeder cattle rose 57 1/2 cents on some short covering after hitting a contract low last Friday. Poor weekly closes last Friday that saw bearish weekly and monthly low closes led to some follow-through selling pressure in the futures markets today. The cattle markets are being pressured by technical selling and concerns about new U.S. tariffs on Mexican imports that could lead to retaliation against U.S. farm products, including beef. Choice beef cutout values fell another 4 cents today and Select lost 53 cents. The recent slide in beef cutout, suggests further declines in cash cattle bids this week. Still, cash bids seem dramatically overdone on the downside.


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