Ahead of the Open: Looking for China Soybean Buying to Develop; Grains Weaker

Posted on 12/05/2018 7:55 AM

Grain Calls

Corn: Down 1 to 2 cents              
Soybeans: Up 1 to 3 cents
Wheat: Down 3 to 6 cents

General Comment:  Uncertainty abounds on US/ China ag product demand and the timing of any purchases. Chinese officials finally said the talks have a “clear timeline and road map.”  At Saturday's Group of 20 meeting in Argentina, U.S. President Donald Trump agreed to postpone new tariffs during the 90-day truce, while his Chinese counterpart pledged to purchase more agricultural products from U.S. farmers immediately.  Still, China’s government probably needs to lift tariffs it imposed on U.S. farm products, before private companies can realistically buy substantial volumes of U.S. goods.  That may mean that any immediate purchases, which would likely include soybeans, will be made by state-run grain companies for refilling state reserves. President Donald Trump tweeted, “We are either going to have a REAL DEAL with China, or no deal at all - at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal - either now or into the future.” The USDA and other government agencies and financial markets are closed today for President Bush’s funeral. Commodity exchanges are open. The weekly ethanol report is delayed until Thursday and USDA weekly export sales report will be delayed until Friday.  Brazil has potential to expand agricultural production on an estimated 43 million hectares of land in the Cerrado region, Aurélio Pavinato, chief executive of listed Brazilian grain producer SLC Agrícola , said on Wednesday.

Corn is seen steady to weak as prices consolidate just under Monday’s high. Market also remains below the October and November highs and will need to see an improvement in U.S. exports and ethanol margins to move through resistance. A Reuters poll shows traders on average are looking for U.S. corn ending stocks before the 2019 harvest to be little changed at 1.738 billion bushels, compared with 1.736 billion estimated by USDA last month and 2.14 billion last year. The government is scheduled to release its update on Dec. 11. World corn reserves may rise to 307.59 million metric tons, up from 307.51 MMT estimated last month but still down sharply from 340.92 MMT last year.

Soybeans are seen opening slightly higher this morning amid speculation that new Chinese buying may soon surface. Traders on average are looking for USDA’s Dec. 11 WASDE report to show U.S. inventories before the 2019 harvest to fall to 945 million bushels from 955 million estimated in November, according to a Reuters poll.  World inventories seen rising to 112.79 MMT from 112.08 MMT estimated last month. Brazil’s weather forecast calls for average rainfall in the north the next  seven days with rain developing late next week in the south that will benefit crops after recent dry conditions. Argentina’s weather forecast is still mostly dry into Monday when a front is forecasted to bring fairly widespread and soaking rains to most areas by the middle of next week.

Wheat futures are seen weaker on worries the world’s largest importer will take a 45-day hiatus on taking delivery of wheat. Egypt has not issued letters of credit for 16 cargoes of wheat (945,000 MT) that effectively delays payment on those shipments, according to Reuters. The payment issue is reportedly on cargoes for delivery periods Nov. 11-20, Dec. 1-10 and Dec. 11-20. The traders for the Dec. 11-20 shipments have reportedly been told to delay shipments until January.

Livestock Calls

Cattle: Mixed

Hogs: Weaker

Cattle futures seen trading both sides of unchanged. Mixed wholesale beef markets Tuesday likely underscore the seasonal slowdown developing. Choice remains firm as usual going into year-end holidays while Select is weakening. Overall sales were very good Tuesday. The worry is that the rebound is cash cattle the past few weeks may have completed the seasonal rally. Light traded reported Tuesday at prices below a week ago.  Feeder cattle continue to lead lower. Calf runs are large and feedyards are near full and trucks reportedly are difficult to arrange.

Hog futures seen mixed as weaker cash hogs are offset by stronger fresh pork prices and active sales. Average cash hogs wee marked 85 cents lower Tuesday while the pork cutout values rose 23 cents, supported by stronger loins and bellies. Slaughter this week is up 30,000 from a week ago and 13,000 from a year earlier.

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