After The Bell: Grains, Soy End Mostly Lower This Week Amid Planting Progress, Demand Worries

Posted on 06/07/2019 2:28 PM

Corn:  Corn futures ended lower Friday, extending this week’s retreat. July corn was down 4 ¾ cents to close at $4.15 ¾ Friday, and down 11 ¼ cents this week. December corn fell 4 ¾ to $4.33 ¾, down 10 cents this week. The market took a pause to the weather rally and bulls will need to step up early next week to prevent a deeper retreat from developing. On June 10, USDA will update planting progress and release the first crop condition ratings of the season. The next day, USDA updates is monthly supply and demand balances for both the U.S. and the world, and most do not expect USDA to be aggressive cutting acreage and yields at this point of the season. Conditions for corn planting have improved somewhat over the last week, but much less than ideal. High topsoil wetness on corn acreage has diminished the past seven days but remains wet from a 30-day comparison. For the week ending June 2, corn planting was the latest since data began in the 1980s by a wide margin. The only years somewhat comparable were in 1990, 1995, and 1996, and each had at least 91% planted by the week ending June 9. It would be a bearish surprise if corn planting is more than 85% complete in Monday’s report and bullish if less than 77% done. It a long way until the 2019 harvest to find out the ultimate impact of this unprecedented wet spring.  

Soybeans:  Soybean futures closed down around 11 cents, near their daily lows and closed at technically bearish weekly low closes. For the week, July soybeans lost 29 cents. Soybean meal futures lost about $3.00 in the nearby futures today, while July soybean oil closed down 33 points. Price action Monday morning will be all about updated weather forecasts or any unexpected substantial rains that occurred in the Corn Belt during the weekend. If the weather forecasts for the region do not stray significantly from those at present then look for some follow-through technical selling pressure to start the trading week. Monday afternoon's crop progress updates could be the most important data point of the week for soybeans and corn. U.S. soybean planting has been severely slowed by rains, with USDA reporting just 39% of the crop was in the ground as of June 2, the slowest on record. Progress has been more active this week but will remain delayed past the longest days of the year—never a good start for producing big soybean yields. Next Tuesday brings the monthly USDA supply and demand report, which will be closely scrutinized. The report is not expected to favor the bullish camp, amid burdensome world supplies. While China has been shipping previously purchased U.S. soybeans to restock government inventories, they are not buying any new supplies.

Wheat:  Wheat futures were mixed today and for the week. July SRW wheat futures fell 5 ½ cents to close at $5.04 ½ on Friday, paring the weekly gain to 1 ½ cents. July HRW futures fell 6 ¼ this week, down 24 cents this week. July spring wheat futures rose 3 ¾ cents on Friday, paring the weekly gain to 16 ¾ cents. HRW wheat took the brunt of selling this week when USDA said crop conditions unexpectedly improved in the week ended July 2. Rainstorms continue to hit the Great Plains and Midwest, significantly slowing harvest. Harvest is 22% complete in Texas and 1% in Oklahoma. In Kansas, there are increasing concerns about yield loss and impact from water and harvest is not expected to begin for another one to two weeks. The USDA will likely show spring wheat planting is nearly complete and conditions remain favorable. It would not be surprising if winter wheat conditions fell this week because of excess rain. On June 11, USDA will likely say this year’s crop is slightly smaller than the 1.897 billion bushels forecast in May. U.S. ending stocks may be trimmed slightly, and world new-crop inventories may be little changed from the 290.3 million metric tons forecast last month.

 Cotton:  July cotton futures ended down the 300 point daily trading limit. Deferred futures finished with losses of 104 to 153 points through the May contract. For the week, July cotton futures dropped 249 points and December futures fell 156 points. This week’s price action violated the uptrend from the May low, which gives bears technical momentum for followthrough selling Monday. On Tuesday, USDA will update its old- and new-crop balance sheets. Traders are expecting a slight increase in ending stocks for both marketing years. But with funds holding a sizable net short position, there shouldn’t be a lot of new selling unless ending stocks come in higher than anticipated. Ample soil moisture early in the growing season suggests yields could be strong and likely means lower abandonment. As a result, production potential is strong. USDA will give us its first survey-based cotton estimate in August.  

Hogs:  All nearby lean hog futures contracts closed down the $3.00 limit today and hit nearly three-month lows. For the week, July hogs lost $2.35. Look for some follow-through technical selling pressure in hog futures on Monday morning, given the limit losses suffered today. U.S. trade uncertainty between Mexico and China are keeping hog bears in control. Mexico is usually the leading buyer of U.S. pork, but this year, China is the biggest buyer. The national average cash hog prices fell 73 cents on Thursday and pork carcass cutout values rose just 18 cents after prices were reported up $2.28 at midday. Sales slowed as slaughter this week is up 107,000 head from a year ago. The average hog weight for the week ending June 1 was 287.2 pounds, up from 285.5 pounds the week before and up from 280.9 pounds a year ago. This adds to short term supplies. Talks between the U.S. and Mexico continued into a third day in a bid to reach an agreement that would stop the imposition of 5% tariffs on American imports from its southern neighbor on Monday.  Vice President Mike Pence said it is still the U.S. plan to go ahead with the tariffs. He said he would talk to President Donald Trump over the weekend to update him on developments ahead of the deadline.  

Cattle:  Live and feeder cattle futures fell Friday, paring weekly gains in most contracts.  August live cattle were down $1.50 today to close at $103.30, up 22.5 cents this week. August feeder cattle fell $2.025 to $137.25 on Friday and were up $4.125 this week. In the north country, packer bids started at $184 and $114 and rose to $185 and $115 without producing much new trade volume. Most packers are still buying for next week. Feedlots will be looking for higher bids next week, bolstered by yesterday’s USDA carcass weight data and by the fact that packers have been interested in buying cattle every day this week. The story going forward is the unexpected large drop in steer carcass weights for the week ended May 25. Weights fell to 842 lbs., down 7 lbs. from a week earlier and 6 pounds lower las a year ago. That’s a new low for the year and the lowest for that week since 2014. Weather and active marketings leave the market very current and that likely means stronger cash cattle bids going forward.

 

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