Ahead of the Open: Wheat Gains Second Day on Export Ideas; Corn, Soy Bounce from Contract Lows

Posted on 09/19/2018 7:57 AM


Grain Calls 

Corn:  Steady to up 1 cent
Soybeans: Steady up 2 cents
Wheat: up 4 to 7 cents

General Comment: Chinese Premier Li Keqiang said the nation would not devalue its currency as part of its response to the latest round of U.S. duties. Trade issues need to be resolved through negotiation and not unilateral action, LI said at a World Economic Forum event today, not mentioning the U.S./China trade spat specifically. U.S. Trade Representative Robert Lighthizer and Canadian Foreign Minister Chrystia Freeland will meet later today in Washington to resume Nafta talks. President Donald Trump has warned he would impose tariffs on Canada in the event of no deal being reached, while Congress remains unwilling to approve a Mexico-only pact. 
The dollar is a little weaker and sitting just above key support as some advisors are recommending reducing U.S.-dollar denominated assets. Goldman Sachs Asset Management is buying Turkish and Argentinian government debt in a bet that the worst is over for the countries that were among those hardest hit by this year’s emerging market sell-off. JPMorgan Chase & Co. strategists say the time has come to cut U.S. equity holdings and boost investment in emerging markets as the benefits of Trump’s tax cuts dissipate. A sharply weaker dollar would help to improve demand for U.S. ag exports longer-term. 

Corn futures are likely to open steady to firmer, correction sharp losses on Tuesday amid a big jump in open interest. Funds are getting closer to near record short positions. The central U.S. turns wet over the next week from the northwest region to the southeast, with colder temperatures to follow. This could lead to some harvest delays. Demand remains strong with exports likely to continue to improve with few cheaper feed wheat or barley substitutes available in the global market.

Soybeans market seen opening on slightly higher after tumbling to new contract lows on Tuesday and the lowest for the most-active futures in 10 years. The dust is beginning to settle on the U.S and China announcements of additional tariffs on Tuesday. This means no talks are likely anytime soon but may focus the U.S. Trade Representative focus on producing deals with Canada, Japan and the EU. 

Wheat futures seen rising on strength in overseas prices and improving demand. Black Sea wheat futures for December settlement rose to the highest in a month and European and Australian futures are rallying. The European Union will likely produce a 129.90-MMT soft wheat crop in 2018, according to the grain trade lobby Cocereal. That’s down 8.9 MMT from the group’s last estimate in June. Dryness continues to expand across Australia, reducing yield and export potential. Egypt bought 475,000 MT of wheat yesterday for delivery in November at prices 1.7% higher than the previous tender. Russia sold 415,000 MT and Ukraine sold 60,000 MT. U.S. wheat prices fell the most over the past month and may be on the edge of seeing an improvement in overseas demand. 

Livestock Calls
Cattle: Weaker
Hogs: Steady to firmer

Cattle seen opening on the defensive as wholesale beef prices slumped on Tuesday with Choice down 75 cents and Select falling $1.91. Still, movement improved yesterday, underscoring the strong demand for beef. 

Hogs seen steady to firm as wholesale pork prices continued the upward trek on Tuesday, adding $1.55 to the highest since July 25. Prices are up nearly 20% since bottoming Aug. 29. The national average cash hog price rose $2.26 while western corn belt cash prices gained $1.96.  China's sow herd fell 4.8% in August from a year earlier, the country's State Council said Wednesday.  The numbers reflect this year's poor pig prices as well as some impact from the recent outbreaks of African swine fever. China has reported more than a dozen outbreaks of African swine flu since early August, leading to transport restrictions and further price declines in some areas.
 

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