Ahead of the Open: Corn, Soy Consolidate This Week's Drop on Energy Rally, Dollar Weakness

Posted on 04/12/2019 7:54 AM

Grain Calls

Corn: Steady to up 1 cent

Soybeans: Steady to up 1 cent

Wheat: Mixed; down 2 cents to up 2 cents

General Comment: Corn and soybeans are paring this week losses tied to sluggish exports and rising South American crop forecasts. Futures have held above key support and the strength of oil prices and a weaker U.S. dollar are encouraging some short covering activities ahead of the weekend. Wheat prices are mixed as attention is shifting to new-crop weather prospects across the Northern Hemisphere. Wet U.S. forecasts remain a positive factor for both corn and spring wheat markets as planting delay risks are on the rise.

Signs of stabilization in China’s economy and indications China is moving toward meeting U.S. demands for a new trade deal have helped to boost commodities this morning. 
China’s total exports rose 14.2% in March compared to year-ago levels, easily topping expectations for a 7.3% rise and the strongest increase in shipments in five months. Imports, however, fell 7.6%, more than expected and greater than the 5.2% decline seen in February. The new data from the General Administration of Customs means that for the first quarter of this year, China’s exports grew by 0.9% while imports contracted by 4.4%. Evidence of China government efforts to stimulate the economy was shown in credit growth in March which came in at 2.86 trillion yuan ($426 billion), more than 1 trillion yuan above trade estimates. Despite the better-than-expected trade numbers, China’s stocks ended the session with their worst weekly performance of the year, increasing pressure on officials to end the trade war. 
Signs that Beijing is addressing issues including financial support for domestic tech industry players and access to key markets suggest that U.S./China business ties might grow again, Jeremie Waterman, president of the U.S. Chamber of Commerce’s China Center, said Thursday at the China Institute’s 2019 China Institute Executive Summit in New York. “I think the two sides are working very hard. It’s not the usual practice to have shuttle diplomacy going on at the level of cabinet-level officials

China state planner says it approves a cotton sliding tariff import quota of 800,000 metric tons (MT) for 2019. The import quota applies to non-state firms, the National Development and Reform Commission said on its website on Friday.

USDA Secretary Sonny Perdue said U.S. Trade Representative Bob Lighthizer is trying to secure terms that are equal to or better than the Trans-Pacific Partnership (TTP, now the CPTPP). He confirmed that there are bilateral talks going on right now with Japan, declining to answer questions on when an agreement would be reached.

USDA did not report any new large daily sale this morning.   

 

Corn market close today is important. A higher close above $2.62 ½ would erase the weekly loss and put the wet, cold weather forecast back in focus for fund managers holding near-record short positions. The corn market has found some support from potential disruption to planting from extreme weather in the U.S. Midwest in the past month. But delays to field work have been set against rising U.S. stockpiles, the prospect of a bumper South American harvest. The U.S. is struggling with exports and the lag in corn export sales is continuing.

Soybean futures are about 4 cents lower for the week. The market has drifted lower on rising South America crop forecasts and sluggish U.S. export sales, including last week’s sales report that showed now new Chinese buying. Still, the potential for a U.S./China trade deal is keeping prices above their March lows.      

Wheat futures traders are awaiting the outcome of an Egyptian tender to see if U.S. wheat would repeat its success in the North African country's previous tender. A purchase of 540,000 MT of optional-origin wheat by Algeria on Thursday could be sourced partly in the United States because of competitive U.S. prices that were challenging French wheat, traders said.

Livestock Calls:

Cattle: Mixed

Hogs: Mixed

Cattle futures seen steady to mixed. Boxed beef values were mixed on Thursday, with Choice down 22 cents and Select up 33 cents. Both are up from week-ago levels and movement has been good this week. Bullish futures traders were disappointed this week’s cash trade was not better than steady in the face of the record winter storm across the Plains and Midwest.

Hog futures seen mixed after failing to hold strong opening gains on Thursday after news of record Chinese pork purchases. Weakness will likely uncover new buying and hedging of potential additional large China pork buying. National cash hog price fell $1.38 on Thursday amid reduced demand. Bad weather led to some processing disruptions on Thursday, as hog slaughter was down 41,000 head from the week prior and 36,000 head from year-ago. Nevertheless, this week’s overall kill is running ahead of year-ago and plants could make up for lost time over the weekend. Fresh pork prices rose 49 cents, extending this year’s rally to nine-month highs.

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