Ahead of the Open: Corn, Soybeans Continue Consolidating Recent Gains; Wheat Drops

Posted on 10/17/2018 7:01 AM

Grain Calls

 

Corn: Down 1 to 2 cents

Soybeans: Down 2 to 4 cents

Wheat:  Down 4 to 7 cents

 

General Comment: Some of the buying in grains the past week probably is partially tied to the unexpected gold market rally forcing hedge funds to cover large short position. Gold has rallied about 3.6% since Oct. 9. The surprise rally caught funds building the largest short position last week since CFTC data began in 2006. Fund buying in corn and soybeans since last week probably has whittled down their corn net-short position to near flat and sharply reduced the net-short in soybeans. The markets will need some further positive news to get them to start building a net long position. Gold is slightly higher this morning and U.S. stocks are headed for a sharp drop to start trading today.

The U.S. Trade Representative’s office told congress on Tuesday it intends to open trade talks with the EU, Japan and the UK Under fast-track rules. The U.S. cannot start trade talks until 90 days after notifying Congress. Trump administration continues to try to make deal with trading partners to increases the pressure on China to come to the negotiation table ready to make a deal. Trade tensions probably will reduce China's third quarter GDP growth to the lowest since 2009, according to a Reuters poll of 68 economists. That report is scheduled for Thursday at 10 p.m. ET.

A dry pattern is expected to persist in the Midwest through the first half of next week, aiding harvest, and increasing available supplies. Farmers have boosted sales the past few days to make room in on-farm storage as they prepare to resume collection of corn and soybeans. The improving weather outlook is a negative factor for prices Wednesday. High water on the Mississippi River continued to slow barge traffic, and some river elevators were unable to load barges. At least six locks, including locks 16, 17, 18, 20, 21 and 22, remained closed on the Mississippi River, but some may start reopening on today as water levels fall.

 

Corn seen slightly lower in a second day of consolidation of recent gains that pushed December futures on Monday to the highest since Aug. 20. Traders are looking for this morning’s weekly EIA report show about 1% drop in both ethanol production and inventories last week.

 

Soybean futures seen slipping for a second session after reaching the highest since Aug. 21 on Monday. Drier weather for U.S. harvesting and rains for boosting early growth in Brazil and Argentina are keeping pressure on prices today. After closing above the 100-day moving average the past two sessions, key closing support for January beans today will be $8.96 ¾.

 

Wheat futures are seen opening lower after failing to hold gains Tuesday after reaching the highest since Oct. 3. One of the three Brazilian wheat mills involved in a deal to import a cargo of Russian wheat this year, the first such deal since 2010, said the quality was good and that it would possibly buy again if the price is right. U.S. wheat exports look set for a strong second half of the 2018-19 season when shipments from Russia are expected to slow, the chairman of the USDA World Agricultural Outlook Board told Reuters on Tuesday at a grain conference in London.  Wheat traders are tired of waiting on this rebound and now need to see actual sales improvement to trigger a more bullish trading stance.

 

Livestock Calls

Cattle: Steady to weak  

Hogs: Steady to lower

 

Cattle futures seen starting steady to weaker Wednesday. After bouncing up from the 40-day moving average last week, prices have struggled this week to clear the 20-day moving average. Wholesale beef was mixed Tuesday with Choice carcass values down 19 cents and Select rebounding 66 cents. Sales improved Tuesday from Monday’s sluggish trade.  Slaughter rebounded to 234,000 head this week, up from 232,000 a week ago. Cash cattle went untraded on Tuesday after five straight weeks of mostly steady values. 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.

 

Hog futures seen steady to weak to start today after failing to sustain early gains on Tuesday.  Both cash hogs and wholesale pork prices were marked lower Tuesday. Slaughter is up 4.2% so far this week. Rising supplies will test the strength of consumer and export market demand in the near term. Underlying support continues from China reporting a new outbreak in African swine fever (ASF) in a small herd in the Shanxi province, the first in the northern province and tenth region to report the disease, the government said Wednesday.  The agriculture ministry also another new ASF outbreak in Liaoning province after announcing on Monday the first large herd was diagnosed with the highly-contagious disease in the northeast Liaoning province

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