Ahead of the Open: Beneficial Weather, Disappointing Exports Seen Pressuring Grains

Posted on 10/18/2018 8:06 AM

Grain Calls

Corn: Down 3 to 4 cents

Soybeans: Down 8 to 10 cents

Wheat: Steady to down 2 cents

General Comment: Overnight, Asian stocks moved lower in part by China’s move to launch an anti-dumping investigation that could negatively impact Japanese machine tool-makers. The U.S. S&P 500 Index futures pointed to a lower open on Wall Street with as U.S. interest rates tick higher. Yesterday’s Federal Reserve minutes showed a majority of members favored raising above what they deem the neutral level for the economy in the long run. China dodged a currency-war bullet Tuesday after the U.S Treasury’s latest report on foreign-exchange rates stopped short of labeling the country a currency manipulator, last imposed in 1994. China’s yuan fell to the lowest level since January 2017 with the Shanghai Composite Index closing 2.9% lower even as authorities try to halt the plunge that has seen the index lose 30% since the January highs. U.S. Commerce Secretary Wilbur Ross said on Wednesday that trade negotiations with China appear to have taken a brief pause, and he damped expectations that the countries would make substantial progress toward an agreement at the late November Group of 20 meeting.

After a few scattered showers Friday and early Saturday, dry weather and variable temperatures will prevail across much of the Midwest through Oct. 30 allowing for field drying and accelerated harvesting, keeping pressure on futures today. Light to moderate rain from Texas to Arkansas will cause some harvesting and winter wheat planting delays.  Rains continue to build soil moisture for corn and soybean crop across Brazil the next 10 days, aiding a rapid, strong start to the growing season there. Rains the next three days will rains some of the driest areas of western Argentina., a positive for reproducing wheat and early corn and soybean crop development.

Corn seen slightly lower as U.S weather improves for harvest progress. USDA said this morning that corn sales in the week ended Oct. 11 tumbled to 382,500 MT, down 72% from the prior 4-week average.  Traders were looking for sales of 800,000 MT to 1.3 MMT last week.

Soybean futures seen sliding on beneficial global weather and slowing exports. Sales last week fell to 293,566 MT from 439,651 a week earlier amid a sharp increase in net reductions for unknown destinations. Sales fell far short of trade estimates calling for 600,000 MT to 1.0 MMT. Soybean meal sales were also below trade estimates at 104,100 MT last week. China's soybean imports may drop 25% in the fourth quarter, the biggest drop in at least 12 years as buyers curb purchases amid the Sino-U.S. trade war and high domestic stockpiles. Soybean imports by China will likely decline to around 18-20 MMT in the last three months of 2018, compared with 24.1 MMT in the same period last year, according to traders surveyed by Reuters. Soybean stockpiles at ports were estimated at 8.57 MMT this week, down from a record of about 9 MMT a week earlier.

Wheat futures are seen opening little changed with weakness in corn and soybeans offset by slightly better export demand. Weekly wheat sales rose 40% to 476,000 MT from a week earlier and in the middle of trade estimates calling for 300,000 to 600,000 MT last week. Russian agriculture ministry confirmed their grain export forecast of 35 MMT, down from 35 to 37 MMT previously and 44 to 45 MMT earlier this year. Ukraine

Livestock Calls

Cattle: Steady to weak  

Hogs: Steady to lower

Cattle futures seen starting steady to weaker after a defensive close on Wednesday. Cash cattle trading is once again slow with a few trades lower and some higher than last week. Traders are waiting on the bulk of trading to get going to gauge packer demand. Wholesale beef was lower yesterday with Choice carcass values down 5 cents and Select declining $1.36. Sales improved again on Wednesday, providing some support for packer bids this week. Slaughter rebounded to 352,000 head this week, up from 347,000 a year ago. Friday’s USDA Cattle on Feed report is expected to show cattle in feedlots rose 6.4% from a year ago in September even as placements slowed to show just a small increase from 2017. USDA said weekly beef exports fell 15% to 13,100 MT from the prior 4-week average.

Hog futures seen steady to weak to start today after falling to three-session low on Wednesday to settle near daily lows. Both cash hogs and wholesale pork prices were marked lower Wednesday. Slaughter is up 3.8% so far this week and hog weights are rising above. Rising supplies will test the strength of consumer and export market demand in the near term. Underlying support continues from China reporting new outbreaks in African swine fever with one a large herd and the other in a small herd in a province that had not detected the disease before. Pork export sales last week rose to 20.800 MT, up 1% from the previous 4-week average.


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