CORN
Corn futures stayed choppy overnight with Dec trading between 5.30-3/4 and 5.24-3/4, inside yesterday’s trading range. The contract is down 4 this morning while plotting a course along the 20-day Moving Average. Economic concerns out of China are giving many commodities a “risk off” feel to start the week. Specifically, a large company, Evergrande, a real estate conglomerate is in financial trouble. Reports suggest the company is $300 billion in debt and is likely not to make interest payments to major banks in addition to bond payments that are due today. Corn futures experienced double digit losses early yesterday before managing to trim losses and close 5-1/2 cents lower in December 5.21-3/4 and 4-1/2 weaker in March to 5.29-3/4. Outside markets are stabilizing this morning with stock index futures clawing their way back on gains of 300 points, Crude up .80 and the dollar weaker. Looking ahead, the trade is beginning to anticipate the Sept 30 Quarterly Stocks report. Yesterday’s Weekly USDA Crop Ratings showed corn 59% Good-to-Excellent, up 1 point from last week. Harvest was 10% complete versus 4% last week, and 8% a year ago. Corn dented 93% vs 87% last week, and 94% a year ago; Corn mature 57% vs 37% last week, and 56% a year ago.
SOYBEANS
The soy complex was narrowly mixed overnight following a down day to begin the week. Nov beans are up 2 cents this morning to 12.64-1/2. Jan beans are up 2 to 12.73-3/4. Meal contracts are off slightly, and soyoil is firm. The trade has a lot of news out of China to contend with since they represent the largest buyer of U.S. beans, and is beginning to anticipate the Sept 30 Quarterly Stocks report. Expectations are in the area of 1.187 bil bu for carryout. More estimates in the days ahead could shift this figure. China’s markets are closed for holiday. Malaysian palm oil prices overnight were up 21 ringgit (+0.50%) at 4194. Yesterday’s Weekly USDA Crop Ratings showed beans 58% Good-to-Excellent, up 1 point from last week. Harvest was in line with the 5-year average at 6% complete. Leaf drop was 58% vs 38% last week, and 56% a year ago.
WHEAT
Wheat futures were narrowly mixed overnight with Dec Chicago down 2-1/4 cents to 6.98-1/2, KC down a penny to 6.99; And, MPLS down 1-3/4 cents to 8.92-1/4. On September 30 the USDA’s small grains report will show the agency’s final wheat production estimates. The Ukraine wheat harvest is reported to be complete with production at 33 mmt. It is starting to rain in parts of Russia, which will continue to improve conditions for winter wheat planting. Argentina’s wheat crop needs more rain but strong odds of a La Nina weather pattern this year could mean adverse growing conditions in that part of the world. Here in the US, warm and dry weather in the southern plains should help winter wheat plantings. Winter wheat planted was 21% vs 12% last week, and 19% a year ago. Winter wheat emerged 3% vs 3% a year ago. For now, the trend is choppy as prices run into descending trend-line resistance.
CATTLE
Cattle futures are called mixed. Yesterday, news of the Evergrande corporation’s financial challenges in China sent markets into sell mode to start the day, but cattle futures battle back to minimize losses. The technical picture looks improved with the lower range open, high end close on the price action, and could open the door to additional short covering. The picture still looks weak as prices may still be in search of a fall low, but additional price follow-through could be a signal that the fall low could be near. Price action on the daily chart saw a rejection of selling at the 127.00 level in December futures, setting up a possible double bottom. Cash expectations are for mostly steady trade. Carcass values have been trending lower, but at midday saw a bid higher, and held most of those gains into the close. Choice carcasses gained 1.19 to 315.66 but select was 1.00 higher to 280.31. Load counts were light at 84 loads. The firmer retail close should support prices on the open. Feeders saw a complete turn off the session lows to finish slightly higher to start the week. Short covering and weakness in the grain markets supported the feeder market. September feeders may be more tied to the Feeder cash index, which traded .85 lower to 153.75, as the contract expires at the end of the month.
HOGS
Hogs are called steady to lower. The market looks to be turning the corner, but concerns about the Chinese economy led the trade on Monday. Fundamentals will still be the key if prices have found a low and are ready to work higher. Markets saw strong selling pressure to start the week as news of financial concerns with Evergrande, a Chinese real estate developer, was having financial trouble sent shock waves through the overnight markets. The concerns regarding Evergrande may have limited longer-term effects, but commodities tied to China more closely, like hogs and soybeans, seemed to hold losses the longest. Despite the weak closes, front end hog futures did rally off session lows, and the price action was modestly favorable, as sellers were rejected on the lows of the day. Cash remains a concern, and the cash index traded .19 lower to 94.45. The cash market has been soft, and the index is trading at its lowest levels since March last spring. National Direct Hogs prices traded lower, as carcass based prices averaged $79.32 down $2.16 for the afternoon. Retail values have been trying to find some footing and were higher midday, which helped turn the trade back to positive levels, before weakening on the close. The pork carcass cutout was 2.52 lower to 102.89 with light movement at 317 loads.
Author
Matthew Strelow