Pro Farmer Market Snapshot: Corn Continues Losses

01:28PM Aug 13, 2019
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Corn futures extended Monday’s limit down close overnight before paring part of the steep drop. Prices are down 5 to 13 cents at midsession.

  • Prices nearly completed a round trip to the pre-planting lows this morning. December fell into but did not completely fill the upside gap left on May 14, falling to a session low at $3.78 ¼. Support now rests at the bottom of the gap at $3.77 ½. Look for selling interest to emerge at the downside gap left overnight at $3.88 to $3.92 ¾.
  • Volume was extremely heavy overnight and this morning, a possible sign of exhaustion.
  • Prices pared a small portion of earlier losses on signs of slight easing in the U.S./China trade war after the two sides talked overnight and the U.S. will delay some tariffs on Chinese products past the Sept. 1 imposition.
  • Monday’s initial USDA corn crop estimate came in 708 million bu. above what traders expected and 26 million bu. higher than its July projection. The estimate would be 519 million bu. less than last year’s production.
  • Weather leans slightly wetter in parts of the Midwest with fluctuating temperatures expected the next 10 days.
  • The weekly USDA Crop Progress Report showed conditions that matched the week-prior result but slightly exceeded industry expectations for a 1% drop in the “good” to “excellent” (G/E) categories. This added pressure to the market overnight.

Soybeans gained back all of Monday’s declines, with prices up 10 to 11 cents and at their highest level this month. Soymeal futures are mostly $5.50 to $6.00-plus higher, and soyoil futures are down roughly 25 points. 

  • November futures have formed a bullish outside-day reversal. A close above $8.93 today, a few cents better than current prices, would be a positive signal. The 100-day moving average crosses today at $8.98 ½.
  • The market is support by Monday’s USDA’s first soybean crop estimate falling 120 million bu. below what traders anticipated and 165 million bu. below the July projection. USDA projects new-crop world soybean inventories will fall to 82.37 MMT from a record 94.33 MMT this season.
  • Prices extended overnight gains on signs of easing U.S./China trade tensions.
  • Top U.S. and Chinese negotiators spoke via phone overnight. Officials from China and the United States agreed to talk again on the phone within two weeks, the statement said.
  • The Trump administration will delay 10% tariffs on certain Chinese products, including laptops and cell phones, that had been scheduled to start next month, the Office of the U.S. Trade Representative said on Tuesday
  • President Donald Trump tweeted: “As usual, China said they were going to be buying “big” from our great American Farmers. So far, they have not done what they said. Maybe this will be different!”
  • With the Argentine peso spiraling, it becomes a question of whether that encourages producer selling of grain stocks or hoarding as has been seen in the past. Argentine producers may opt to hold grain as a hedge against inflation, creating possible new markets for U.S. soy products.

SRW wheat futures are up 3 to 6 cents and HRW prices are down 2 to 3 cents. Spring wheat futures are down 2 to 5 cents.

  • SRW prices have erased earlier losses after hitting their lowest point since May 16. Still, prices are about 20 cents below significant overhead resistance near $5.00.
  • December HRW futures fell to a new low and turned higher. The market’s drop to new lows was not confirmed by new lows in the momentum indicators, suggesting a near-term low is trying to form.
  • The market will follow the lead of the corn market.
  • Trump has asked Japanese Prime Minister Shinzo Abe to buy a “huge amount” of U.S. farm products, according to a report from the Kyodo news agency citing Japanese and U.S. government sources. Soybeans and wheat were included in the request, Kyodo
  • The report indicated one possibility was to buy the products as food security for African countries and would be worth several hundred million dollars, including transportation costs.

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Live cattle are sharply lower to down the expanded daily trading limit. Feeder cattle are also sharply lower.

  • Live cattle are continuing to plunge on concerns about slaughter capacity. Losses seem excessive but funds are caught long.
  • A fire at a Tyson Foods beef processing plant near Holcomb, Kansas last Friday sent the cattle market reeling yesterday as the plant is one of the largest in the U.S. and it will be shuttered for an indefinite period.
  • Steve Stouffer, president of Tyson Fresh Meats, said he still does not know when the facility will reopen and resume processing. He said the company is “taking steps to move production to alternative sites.”
  • There are seven other major plants within reasonable proximity that could pick up much of the lost Tyson slaughter capacity, especially with larger Saturday kills.
  • But it will support higher wholesale beef which jumped $2.25 for Choice on Monday and $3.98 for Select on strong sales. Packer margins jumped to $184.90, up from $132.90 a week ago, according to HedgesEdge.com

Lean hog futures are mixed to mostly higher.

  • Futures are supported by strong packer margins that may help to stem the recent losses in cash hogs.
  • Fresh pork prices were mixed to lower on Monday and will need to find some fresh buying to lend a firmer tone to the cash market.
  • The market did get some support from signs of easing trade tensions with China.