News & Media

Market Briefs for November 7

The steep uptrend in cattle futures continues full steam ahead. Wholesale beef prices and Plains cash prices are supporting futures as strong market fundamentals keep prices high. Choice cutouts are the highest they’ve been in October/November in five years. They were up another $6.05 last week to $231.67. The December contract is currently testing the waters above $120. A close above $120 would open the possibility of a retest of the contract high of $124. February has little resistance below the contract high of $126.30 and could be headed for a retest of that level. However, the market is technically oversold and trading at a significant premium to cash, so a downward correction is also possible.

Hog futures are chopping along mostly sideways despite trading in relatively wide ranges each day. Deferred contracts are trading at much higher levels than the nearby contracts, but are looking technically weak after charting a bearish key reversal last week. The June contract continues to fail at resistance below $92, and could work lower as a result of technical selling. Nearby contracts are under pressure from weakness in cash hog prices due to record large hog supplies and continued uncertainty about U.S.-China trade negotiations. Weekly exports were disappointing at 16,600 metric tons, down 45% from last week and down 82% from the prior 4-week average.

Rice futures have been confined to a narrow trading range in the past few days. The harvest is complete at this point, and the smaller acreage and lower yields have been built into current price levels. This market needs to see good demand news in order to jump-start buying interest. Unfortunately, that news did not come this week, with weekly export sales uninspiring at 53,300 metric tons, down from almost 85,000 metric tons each of the two weeks prior. The January contract has nearby resistance at $12.10, with support at the recent low of $11.73 ½. 

Cotton futures rallied to new four-month highs in October, but have now settled into a more sideways trading pattern. Underlying support is coming from concerns about the quality of the crop. USDA says that, as of November 3, the crop was 53% harvested nationwide. The Arkansas total was 84%. This latest round of wet weather through the mid-south could impact the quality of the remaining crop. The Texas crop was only 42% harvested in the latest report, and the market continues to worry about potential yield and quality there. Export sales last week came in at a solid 164,000 bales and included a sale of 23,500 bales to China. December has resistance at 66 cents. A move above that level could open up a move to resistance at 68 cents. 

January soybeans have retreated from what looks to be a double top at $9.59, but have found support at $9.25 for the moment. Weekly exports were strong and will provide underlying support. USDA says 1.807 million metric tons of beans were sold for export last week, bringing total sales to only 2.1% below the year ago total. The November crop report is not expected to cut yields by much, and it is now likely the reduced size of the crop is built into prices. 75% of the crop is in the bins as of November 3, and harvest will be winding down soon. 

Half of the national corn crop has now been harvested, according to USDA. The November crop report could show an additional reduction in yield, but it is expected to be small. Corn exports continue to be extremely disappointing and are keeping a lid on prices. Weekly export sales were only 488,000 metric tons. U.S. corn export sales for the year are now 47.2% below the year ago total, and shipments are down a whopping 62.8%. It is going to take some serious improvement in export demand in order to move the market higher. Ethanol production is trending higher, but production remains well below year-ago levels and below the rate needed to meet USDA’s projection for corn-for-ethanol usage on the Supply/Demand balance sheet. December currently looks headed for a retest of support at $3.70. Failure at that level would open the possibility of a retest of the September low of $3.52, which could happen fast depending on what the November reports say on Friday.