Ahead of the Open: Corrective Buying Expected in Grain, Soy Futures

Posted on 05/17/2018 8:16 AM

Crop calls

Corn: 1 to 2 cents higher
Soybeans: 3 to 5 cents higher

Wheat: 5 to 8 cents higher

Wheat futures led corrective gains in the grain and soy markets overnight. We have slightly backed off our opening calls this morning compared to how the markets finished overnight.

The trade deal pendulum seems to be swinging up this morning. Reports have surfaced that Chinese Vice Premier Liu He signaled he was coming to the U.S. do a deal as he was leaving Beijing. China may offer a $200 billion-plus trade deficit reduction package, covering 20 or possibly even more sectors over two years, with most of it focused on agricultural purchases.

Aside from a strong figure for old-crop corn export sales, the weekly data was rather uninspiring, even though mostly within expectations.

Corn export sales of 985,700 MT for 2017-18 and 129,200 MT for 2018-19 were with the range of pre-report estimates.

Old-crop soybean export sales of 281,900 MT fell just short of the bottom end of pre-report estimates. New-crop sales of 224,700 MT were within expectations. USDA reported a daily sale of 132,000 MT of U.S. soybeans to an unknown destination for 2017-18. This is the first daily export sale for any commodity since May 3 and the first daily soybean sale since April 30.

Wheat sales at 63,100 MT for 2017-18 and 131,700 MT for 2018-19 were yet another reminder of the struggles U.S. wheat faces on the global market.


Livestock calls                                                                      

Cattle: Choppy to lower
Hogs:  Choppy to higher

Live cattle futures closed poorly again Wednesday, which suggests there will be followthrough selling on the open this morning. But we feel the downside is overdone and wouldn’t be surprised to see corrective buying surface at some point today, despite sharply lower cash cattle trade. Most cash cattle sales have taken place in the $115 to $117 range in the Southern Plains, which is down roughly $5 to $7 from last week but well above where futures are trading.

Lean hog futures ended high-range with strong gains in the June and July contracts on Wednesday. As a result, we anticipate a firmer start to trade today. The cash hog market continues to firm, as the average cash hog price rose 13 cents yesterday. But trade uncertainty continues to hang over the market, which could limit buyer interest. Therefore, traders won’t likely want to aggressively build premiums summer-month hogs hold to the cash index.

Beef export sales of 11,000 MT were down 3% from the previous week and 34% from the four-week average.

Pork export sales of 21,900 MT were up 33% from the previous week and 12% from the prior four-week average.

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