Ahead of the Open: Grain, Soy Futures Supported by Easing Trade Tensions with China

Posted on 05/18/2018 8:00 AM

Crop calls


Corn: 2 to 4 cents higher
Soybeans: 1 to 3 cents higher

Wheat: 3 to 6 cents higher


Grain and soy futures were boosted overnight by eased trade tensions with China, which sparked corrective buying. We expect the corrective buying to continue on the open this morning, though major soybean sales cancellations and a firmer U.S. dollar may curb buyer interest.


China announced overnight it has dropped its probe into shipments of U.S. sorghum, which sends the signal trade tensions have eased and a broader trade deal may be close. However, China also denied reports from earlier this week it is willing to slash the U.S. trade deficit by up to $200 billion. So… the trade tone is more upbeat, but there isn’t a resolution yet.


USDA announced soybean sales cancellations of 949,000 MT to unknown destinations – 829,000 MT for 2017-18 and 120,000 MT for 2018-19. The recent, sharp price pressure likely triggered the cancellations. If so, some of the cancelled tonnage will likely be bought back at a lower price.

USDA also announced a daily soybean sale of 168,000 MT to an unknown destination – 56,000 MT for 2017-18 and 112,000 MT for 2018-19.



Livestock calls                                                                      


Cattle: Choppy to higher
Hogs:  Choppy to higher


Cattle futures posted corrective gains and ended high-range Thursday. That should be enough to encourage followthrough, corrective buying on the open this morning. But it’s unlikely traders will be aggressive buyers, despite the huge discounts futures hold to the cash market, unless they feel a short-term low was forged earlier yesterday. The sharp drop in cash cattle prices this week and expectations that wholesale beef demand will slow following Memorial Day are likely to keep traders cautious about the long side of the market.


Hog futures are also expected to favor the upside on the open this morning on support from rising cash and product prices. The average cash hog price firmed 58 cents yesterday, while the pork cutout value was up $1.34. But the big premiums summer-month hogs hold to the cash index remain a limiting factor to traders actively pumping money into the long side of the market.


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