Ahead of the Open: Grains, Soybean Seen Adding to Recent Gains on Shrinking Global Crop Ideas

Posted on 07/18/2018 7:59 AM

Grain Calls

Corn: Up 1 to 2 cents

Soybeans: 3 to 5 cents higher

Wheat: Up 2 to 5 cents

 

General Comment:  China’s foreign ministry warned Wednesday that the U.S.-driven trade war has become the biggest “confidence killer” for global economic growth. Just yesterday, Federal Reserve Chairman Jerome Powel said he sees the U.S. on track for years of more steady growth. He also said the markets have discounted the trade war risks and there would be a positive outcome if the administration’s bargaining ultimately produced a world of lower tariffs. Still, U.S. Treasury Secretary Steven Mnuchin has no formal bilateral meetings planned with Chinese officials at this weekend’s G20 finance ministers meetings in Argentina. The U.S. Midwest weather forecast had no major changes with above average rains this week and temperatures running average to below average in the north and central regions and hot in the southwest. Drier conditions develop next week with temperatures warming up again, but not excessively hot.

 

Corn futures expected higher on improving demand and positive technical momentum signals. Prices head for third straight gain, and close over $3.60 in December futures would be positive. South Korea bought another 60,000 MT of U.S. grain after buying about 2 MMT in June. German barley crop may fall to 7.3 million MT, down from 9 MMT a year ago after hot, dry weather curbed yields, farming association DBV said Wednesday. Corn production also suffered from drought, so more grain buying is expected and tighter global feed supplies.

 

Soybeans are seen trading firmer to start today, heading for a third straight gain. November futures are still below June 19 spike low at $8.64 1/4, so that will be a key barrier to broach to sustained strength today after touching $8.63 1/2 overnight.  Brazilian soybean prices have been boosted by Chinese imports and higher trucking costs. The logistical problems may curb fertilizer deliveries and curb planting of soybean later this year after some estimates for as much as 5% more acres. Palm oil futures in Malaysia jumped more than 2% overnight on speculation global demand for food and fuel is set to improve after the steep drop in world vegetable oil prices this year.

 

Wheat futures will open higher and head for fourth gain in the past five sessions. No bottom confirmed yet with another 11-cent rally needed to turn the trend higher. SRW wheat is capturing some export business as French, German and Russian prices rise above U.S. values, and the weekly sales report Thursday will be closely examined for confirmation. German farm association did not give a wheat crop forecast today but acknowledged drought hurt yields

 

Livestock Calls

Cattle: Steady to higher

Hogs: Steady to weak

 

Cattle seen steady to firmer after a weak close Tuesday. Boxed beef cutout values rose 63 cents
for Choice and $1.19 for Select on moderate to good demand and moderate to heavy offerings. 
Traders are looking for July 1 cattle on feed to be up 4% from a year ago when USDA reports
Friday afternoon. June placements seen up 0.6% from a year ago while marketing rose 1.1%. 

 

Hogs futures seen steady to lower in follow through selling to Tuesday’s weak close and lower cash hog prices. Supply concerns are the focus. The U.S. hog industry is expanding at a time when major trade partners like Mexico as well as some lesser ones like China imposed pork tariffs. But exports through May were impressive and worries are likely overdone after U.S. and Mexico held talks last week. The pork cutout value was able to climb 83 cents Tuesday led by strength in ribs, loins, hams and bellies, and that may lend underlying support in early trading.

 

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