Ahead of the Open: Better Export Business Seen Supporting Grains, Soybeans

Posted on 12/07/2018 8:07 AM

Grain Calls

Corn: Steady to up 2 cents          
Soybeans: Up 1-4 cents
Wheat: Mostly up 2 to 4 cents

General Comment: Soybean markets  are nervous waiting for Chinese purchases. Still, markets have held up well this week after gapping higher to start and holding above those gaps in both corn and soybeans. Overnight President Trump tweeted, “The teams of both sides are now having smooth communications and good cooperation with each other. We are full of confidence that an agreement can be reached within the next 90 days.” I agree!” The feud between China and the U.S. sparked by the arrest of a senior Huawei Technologies executive in Vancouver may ease or intensify as Huawei’s CFO Meng Wanzhou is seeking bail today and could go free with a favorable court decision. So far there has been no political tie of Wanzhou with the US/China trade talks, but concerns persist. One of the bright spots for the U.S. economy faded a bit last month as U.S. job growth slowed in November and wage gains failed to meet pre-report expectations. Still, the unemployment rate remains at a 49-year low of 3.7% and wages are still rising. This helped support stocks and weaken the dollar, which may lend support to the grain markets.

Corn is seen steady to firmer on rising crude oil prices as OPEC agrees to production cuts and a positive weekly sales report. USDA reported the exporters sold 1.178 million metric tons (MMT) of corn last week. That was up 26% from the prior four-week average and topped trade estimates for 800,000 metric tons (MT) to 1.1 MMT. 

Soybeans are seen steady to firmer on modest improvement in export demand and hopes for some new buying from China in the days ahead. USDA said exporters sold 890,900 MT last week, 87% larger than the prior four-week average. Traders were expected sales to total 600,000 to 900,000 MT. While China has all but stopped buying U.S. soybeans the past four months, soybean meal exports started the marketing year at a record, USDA data showed yesterday. U.S. soymeal exports for October rose to 997,967 MT, 42.5% above year-ago. The previous record was 843,188 MT in 2016. Brazil’s northern half has seen well-above normal rainfall for the season so far, but forecasts have drier weather moving in for the second half of December. Argentina is expected to see its dry pattern continue for another five days before widespread rains bring needed moisture relief and move into parts of Paraguay and southern Brazil.

Wheat futures are seen firming on better global demand. USDA said exporters sold 711,800 MT of U.S. wheat in the week ended Nov. 29, jumping 58% from the prior four-week average. It was the best weekly sales since Aug. 9. Also, the daily USDA reporting service said private exporters sold 224,000 MT of hard red winter wheat for delivery before June 1 to unknown destinations Egypt bought 350,000 MT of wheat in an international tender yesterday including 290,000 MT of Russian wheat and 60,000 MT of Ukrainian wheat. heat traders seem to have taken concerns over payments of some cargoes to Egypt in stride. Russia exported 36.8 MMT of wheat in the first 10 months of the 2018 calendar year. That was  50% more than the same period last year. Russia’s active exports will soon deplete inventories and business to other global suppliers including the U.S.

Livestock Calls

Cattle: Steady to weaker

Hogs: Steady to firmer

Cattle futures seen weaker after a mixed trends in wholesale beef on Thursday amid slow new sales. Choice fell 59 cents yesterday and Select gained $1.36. Domestic beef demand may have seen its seasonal peak ahead of the holidays. USDA reported overseas buyer canceled more sales then they bought, leading to a net sales reduction of 100 MT for 2018. 2019 sales were 12,900 MT. Sales report is a little disappointing.

Hog futures seen steady to firm on new port export sales to China last week. Total sales last week were 20,000 MT, up 4% from the prior four-week average and included 2,400 MT sold to China. Sales for delivery in 2019 was 8,600 MT. Shipments are a marketing-year-high 27,900 MT, up 6% from the prior four-week average. Large slaughter hog supplies seem capping gains.  The pork cutout value firmed 42 cents Thursday, while packers moved a modest 357.50 loads. Thursday’s lows are key near-term support going into the weekend.

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