After the Bell: Corn Slides, Beans Gain Ahead of USDA's Supply and Demand Report

Posted on 07/09/2019 2:50 PM

Corn: Corn futures drifted lower and closed in the lower half of the daily price range. December futures were down 6 ½ cents to $4.37 ½. Erratic trading continues as prices fell for the first time in five sessions on Tuesday. Weather is having a mixed impact. A few showers today and Wednesday across the Midwest and more rain possible later next week eased yesterday’s concerns about hot, dry weather in between. However, forecast confidence is low about next week’s rain as forecasting the path of the remnants of a tropical storm under a ridge of high pressure is very difficult. Corn will need regular rain and no extended hot, dry periods to reach yield potential, already reduced by late planting dates. Prices also rose on fund long liquidation. Funds held a larger net-long position than expected as of last week, suggesting many are already betting on a large cut in U.S. production. The CFTC report showed managed money net-long position fell about 6,300 futures and options to 181,600 contracts. From June 25 to July 2 the December corn contract dropped 31 ½ cents. During the same week, commercials increased net-short positions to 484,109 contracts.  

Soybeans: Soybean futures closed up around 6 cents today after hitting nearly four-week lows early in the session. Prices closed near the daily highs and scored bullish daily reversals. Soybean meal futures were up just over $3.00 in the September and December contracts, while September bean oil closed up 4 points. The soybean market got some buying support today as USDA Monday afternoon reported 53% of the U.S. bean crop rated “good” to “excellent” condition last week, down 1 percentage point from a week earlier and below trader forecasts for a 1 to 2 points improvement. Also, just 10% of the soybean crop is blooming, well below the 32% average the past five years. Monday afternoon’s weekly CFTC report had the managed money net short about 37,000 soybean futures contracts, selling 2,900 contracts on the week. In the week ended July 2, November beans were down 27 ¾ cents. The selling pressure was smaller than expected, a reflection of concerns about the crop. On Thursday, USDA in its monthly supply and demand report for July is expected cut the size of this year’s U.S. crop to 3.833 billion bu., down from 4.150 billion bu. estimated in June because of the smaller acreage estimate released on June 28. New-crop ending stocks may fall to 812 million bu., according to a Reuters poll of analysts, down from 1.045 billion estimated on June 12.

Wheat: SRW wheat futures faced pressure throughout the day and the market settled 5 ½ to 8 ¼ cents lower for the day. HRW wheat finished 1 ½ cents lower in most contracts, and spring wheat futures closed roughly 5 to 6 cents lower.  Welcome rains have fallen on some key spring wheat producing areas like Montana and North Dakota, which weighed on the spring wheat market today. In addition, USDA yesterday said that 78% of the crop is in “good” to “excellent” condition, which is just two points under year-ago levels. Development is still far behind the norm, but the market is signaling that is already factored into prices. Winter wheat harvest advanced a bit more than expected over the past week to 47% complete, signaling the worst of related hedge pressure could ease soon. But progress still lags the norm by a wide margin.

Cotton: October cotton futures closed down 208 points and the December contract fell 236 points. Both hit new contract lows today. Serious chart damage was inflicted today. Part of the downdraft in cotton futures today is tied to the following Twitter comment from President Trump today: "India has long had a field day putting Tariffs on American products. No longer acceptable!"  Trumps comment suggests the U.S. is set to take aim trade action against India, which has become a major importer of U.S. cotton this year because of crop losses. The U.S. cotton market is already struggling from weaker worldwide demand and today’s news from Trump was another potentially bearish blow.Top negotiators from Washington and Beijing are set to speak this week to revive stalled trade talks, as disagreements over prior commitments and political considerations threaten to bog down discussions. China has made no official mention of a commitment to purchasing more U.S. ag products, and a person with knowledge of the event said Chinese Leader Xi Jinping made no such promise, according to Reuters.  

Hogs: July lean hog futures finished $1.30 higher, while the August through December contracts ended the $3 daily trading limit higher today. As a result, the daily trading limit is expanded to $4.50 for Wednesday’s session. Hog futures caught a bid this morning and quickly surged limit higher in the most actively traded contracts. While today’s gains were corrective in nature and technically driven, this could be a key sign the market is ready to work higher after an extended price drop. Followthrough buying during Wednesday’s session would make a stronger case the market is poised for an extended move higher.Fundamentally, hog traders may wait on a rise in cash hog prices before they actively return to the market as buyers given the big premium August hogs hold to the cash index and with the October and December contracts at slight discounts.  

Cattle:  Live and feeder cattle closed sharply higher Tuesday, with prices trading to new session highs after the settlement. October live cattle rose $1.975 to $108.125, with October rising $1.90 to $109.375. August feeders gained $3.975 to $142.875.  Cash cattle gained about $1.11 last week on average and most look for $1 better bids this week as packers need some inventory after light forward sales last week. The number of cattle grading Choice and Prime fell last week, a sign that feedlots are very current and likely to stay that way much of this month and next. Midday beef prices were sharply lower, with Choice falling $2.81 and Select declining $1.90 Tuesday. Sales were moderate. Demand for ground beef continues to be good and the end-meats of the carcass will gain in value to the middles. Seasonal weakness may last until late this month when prices usually begin a rally into August. Packers may have excellent margins, but signs of demand would need to come from the product trade.

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