Ahead of the Open: Grains, Soybeans Firm ahead of Key USDA Reports This Morning

Posted on 11/08/2018 8:07 AM

Grain Calls

Corn: Steady to up 2 cents
Soybeans: Up 1 to 3 cents
Wheat: Up 1 to 4 cents

General Comment: The focus today is all on this month’s USDA Crop Production and World Supply & Demand  updates. The report will provide a better indication of the impact of excessively wet conditions and winds had on U.S.  corn, soybeans, cotton and other field crops. Traders are also looking for fresh clue on USDA’s analysis of the ongoing U.S./China trade war on U.S. soybean exports and Chinese imports. The surprise 20% upward adjustment to China corn production the past several years after new data from the agricultural census was reviewed also presents a data challenge for USDA this month. However the official China government report today did not show the big upward revisions.  A top Chinese official told U.S. National Security Adviser John Bolton that Taiwan was Beijing’s “most important and sensitive” issue, as the two sides began high-level meetings aimed at bolstering relations strained by the trade conflict. Still, Yang Jiechi, who heads the Communist Party’s foreign affairs committee, said China was committed to a “no confrontation” policy with the U.S. Still, Chinese exporters are shipping as much as possible in a rush to beat new tariffs should talks between Presidents Trump and Xi go poorly late this month on the G20 meetings in Argentina. Xi, after meeting with former U.S. Secretary of State Henry Kissinger, indicated that China wants to resolve differences with the U.S. but that America has to respect China's development path and interests.
The Federal Open Market Committee is widely expected to keep the benchmark target for rates unchanged in a 2% to 2.25% range when its decision is announced later today. The Federal funds rate has moved to the top end of the target range, something the Fed is keen to maintain control over or another sign that policy markets will be ready to raise rates at next month’s meeting.  Dollar is firmer today as expectation for tightening Fed policy provided support. 

Corn is expected to reopen firmer today as trader position for the monthly supply and deamdn forecasts.  USDA weekly export sales report this morning showed exporters sold 701,500 MT in the week ended Nov. 1. While up 32% from the prior four-week average, it falls in the lower half of the range of estimates calling for 600,000 to 900,000 MT of new business.

Soybean prices will be mixed amid positioning for the monthly government estimates and a disappointing weekly export report. New sales last week were a net 388,400 MT, down 2% from the prior week, albeit up 16% from the sluggish pace of the prior four-week average. It also come in below the 400,000 to 700,000 MT expected last week.

Winter wheat planting continues to struggle with cold U.S. temperatures and wet soils, lending support to the futures.  Wheat sold for export last week rose 14% above the prior week’s total and was 47% above the four-week average. Sales of 661,200 MT topped the range of estimated for 300,000 to 600,000 MT

Livestock Calls

Cattle: Steady to weak
Hogs: Steady to weak    

Cattle futures are seen on the defensive to start today. Choice beef prices were down 54 cents and Select plunged $2.89. However, sales were moderately active, a sign of strong domestic demand ahead of seasonal featuring after Thanksgiving.  Slaughter remains manageable, up 1.4% from a year earlier. USDA weekly export sales report this morning will be a drag on futures as sales slipped 31% below the prior four-week average

Hog futures are seen opening steady to lower on cash market weakness. National average hogs fell 44 cents Wednesday and average hog prices in Iowa/Minnesota region fell $1.09. The wholesale pork carcass price was down $1.33, led by losses in loins and bellies. Slaughter this week is up 48,000 head, or 3.5%, from a year ago. Weekly USDA pork export sales data showed business rose 24% above the prior four-week average, but still down 3% from a week earlier and no signs of Chinese buying. Still, look for support to develop on weakness after China reported new African swine fever outbreaks in four provinces, including Fujian, Hunan, Jilin and Jiangxi.

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