AFter the Bell: Grain, Soybeans Rise Ahead of USDA Report on Drier Forecasts

Posted on 07/10/2019 2:42 PM

Corn: Corn futures prices closed up 3/4 to 1 1/2 cents today and near their session highs. Most weather models are agreeing a system in the Gulf of Mexico will be a significant tropical storm by the weekend and may become a hurricane shortly before landfall. However, the path of that storm after entering the U.S. remains debated. Some weather models were calling for the storm to move into Illinois and the eastern Corn Belt, providing substantial and needed rains. However, at least one weather forecaster at midday moved the rains farther east and out of the Corn Belt. That provided a modest, late lift for the corn futures market. If it gets hot and dry quickly the bull market in corn and soybeans will return with a vengeance. Another threat to the 2019 corn and soybean crops is an early frost or even a normal freeze date, given the crops are at least two weeks behind normal after late planting. Traders are cautious ahead of the USDA supply and demand report Thursday morning. Questions will remain about yields and acreage for months. It’s too early to make yield forecasts and USDA won’t update acreage until its August report when 14 states will be resurveyed.  

Soybeans: Soybean futures got off to a firmer start, drifted lower but later uncovered some buying interest that helped the market to finish 7 ¾ to 10 ¼ cents higher for the day. Soymeal and soyoil also notched gains for the day. Midday weather updates shifted the path of the Tropical Depression eastward, with the result being reduced rainfall chances for the western Corn Belt. Given the wet spring, timely rains are needed for shallow-rooted crops. And high temperatures are expected to add to crop stress. That helped the bean market to push higher into the close, with July sand November soybeans taking out and settling above the 100-day moving average. A drop in the U.S. dollar index and gains in both the corn and wheat markets also made it easier for soybeans to rally. Meanwhile, U.S. officials continue to talk about large Chinese purchases of U.S. ag goods, including soybeans. Recent ship lineup data shows roughly 455,000 MT of beans are being loaded for shipment to China out of the Pacific Northwest.  

Wheat: Wheat futures closed higher after testing support. September SRW futures rose 2 cents to $5.04 ¾, and September HRW gained 2 ¼ cents to $4.41 ½. September spring wheat gained 1 ½ cents to $5.28. Wheat followed corn to the upside today as midday weather forecasts pushed the path of Tropical Storm Barry farther east than suggested earlier today, increasing risks to the Midwest corn and soybean crops from continued warm to hot temperatures and drier conditions. Paris wheat futures ended slightly higher on Wednesday, pulling away from an earlier seven-week low as traders awaited further indications on the summer harvest while also looking ahead to U.S. government wheat production forecast and world supply and demand updates.  Egypt's state grain buyer, the General Authority for Supply Commodities (GASC) bought 240,000 MT of Romanian and Ukrainian wheat. But that’s only 4 cargoes out of the 17 offered. That means more competition from the cargoes offered by Russia, Romania and Ukraine in upcoming tenders. Early yields from Ukraine point to a crop that will be steady with the record harvest a year ago, the agriculture ministry said today.

Cotton: Cotton futures settled 35 to 54 points higher through the May 2020 contract. Cotton futures posted a modest price recovery following Tuesday’s technical breakdown. Today’s gains were purely corrective in nature, as fresh fundamental support is lacking. Traders simply wanted to cover some of the short positions they added yesterday given their net-short stance. Additional light short-covering is possible Thursday ahead of USDA’s July crop reports. Traders expect a slight uptick in old- and new-crop ending stocks in tomorrow’s report. We anticipate a cut to USDA’s old-crop export forecast, which would push 2018-19 carryover higher. The bigger beginning stocks would also push projected 2019-20 carryover up from last month. Global ending stocks are also expected to rise slightly.

Hogs:  Hog futures closed higher to sharply higher, building on Tuesday’s strong rally. August hogs gained $2.65 to $81.725, while October rallied $2.25 to $73.25. Strong cash bids supported a further rally in futures today. Lower wholesale pork cutout values at midday provided only minor headwinds to the rally. Midday movement was only moderate after a big sales day on Tuesday. Big sales need to continue with slaughter this week already running 76,000 head above last year and up 24,000 head from a week ago. Thursday’s trade will be dominated by the sales and shipment totals to China and Mexico in the weekly USDA export sales report. Last week, sales were down 11% from the prior four-week average with no sales to China. Shipments remained strong, up 10% from the four-week average with China and Mexico taking 59% of the total.   

Cattle:  August live cattle futures closed down 50 cents, with the October contract down 32 1/2 cents. August feeder cattle were down 22 1/2 cents today. The cattle futures markets today saw corrective price pullbacks from solid gains Tuesday that pushed prices to multi-week highs. Futures saw some selling pressure today as boxed beef prices dropped again at midday, with Choice down $0.80 and Select falling $1.18 on sales of 112 loads. It will be important to see stepped up sales at the lower prices to finish out this week. Feeder cattle futures have been leading the recent rally, with funds holding the second-largest net-short position ever as of July 2, according to CFTC data. That suggests those nervous short funds probably have some more liquidation, to support more price upside in the near term.

Add new comment