Ahead of the Open: Mixed Trade in Consolidation of This Week's Losses

Posted on 10/19/2018 7:11 AM

Grain Calls

Corn: Steady to mixed

Soybeans: Steady to up 1 cent

Wheat: Steady to mixed

General Comment: Chinese President Xi Jinping and U.S. President Donald Trump have tentatively agreed to meet on the sidelines of the Group of 20 summit in Buenos Aires next month, according to South China Morning Post citing an unnamed source. An initial date has been set for November 29, the day before the summit formally gets under way. If confirmed, it would be the first face-to-face meeting between the two leaders in nearly a year and suggest both Washington and Beijing were ready to de-escalate the trade tensions. The deceleration of the Chinese economy is clear as third quarter GDP growth cooled to 6.5%, the slowest since 2009 and slower than the 6.6% expected, the government said this morning. Growth last quarter was trimmed by the weakest factory output since February 2016 in September. The central bank announced Friday new measures to help ease company financing problems and encourage commercial banks to boost lending to private firms. The U.S. Midwest weather forecast is mostly dry into late next week after a few light showers finish up today and early Saturday.

Farmers are ready to take advantage of improving weather outlook to harvest crops and see how much damage may have occurred from heavy rain and snow the last few weeks. Brazil weather has a soaking rain pattern in most areas over the near to mid-term with coverage around 85%, improving the early-season development of corn and soybeans. Argentine weather looks a bit wetter into next week with only Buenos Aires and Entre Rios missing the bulk of the rains.

Corn seen mixed to start dealings this morning. Prices are headed for a weekly loss after rising to the highest since Aug. 20 on Monday. December futures closed at $3.73 3/4 last week and this is the key pivot point going into an open harvest weekend. So far, this week’s retreat has held support, but bulls are now on the defensive. Focus will be weekend harvest results and fresh export sales next week. U.S. Environmental Protection Agency Acting Administrator Andrew Wheeler said on Thursday the agency has the authority to allow sales of higher ethanol blends of gasoline year-round without an act of Congress.

Soybean futures seen rebounding this morning after finding light buying support at the 20-day and 50-day moving averages. January futures closed at $8.81 ¾ last week and that’s the key pivot price for the near-term outlook.  Trader will be keeping a close watch on a planned trucker strike in Argentina next week that may disrupt grain shipments. If the strike were to continue for any prolonged period, this could also affect grain shipments to the ports. Market may come under some light early pressure after USDA announced this morning that China cancelled 180,000 MT of prior purchases for delivery in 2018-19. In addition, exports reported to USDA that 120,000 MT of optional origin sales to unknown destinations were also cancelled

Wheat futures are seen opening mixed as winter wheat slip lower and spring wheat seen slightly higher. The markets continue to struggle with disappointing export sales and shipments. Weather is positive for finishing up winter wheat seeding in the U.S.

Livestock Calls

Cattle: Higher

Hogs: Steady to lower

Cattle futures seen starting higher after the late recovery on Thursday and the strong rebound in beef prices this week. Choice beef prices up more than $4, or 2%, this week to the highest since Sept. 6. Sales improved too after a sluggish start on Monday. Slaughter slowed Thursday, cutting the weekly total to 1,000 less than a week ago. It looks like packer may have to begin paying more for live supplies after holding bids essentially unchanged for the past five weeks.  Trading may be cautious ahead of today monthly USDA Cattle on Feed Report, which is expected to feedlot numbers 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 tumbling Thursday amid active fund long liquidation. Cash hogs are weaker this week and wholesale pork carcass prices fell to the lowest in a month. Still prices remain almost 5% higher than a year ago, a sign of underlying demand. Slaughter is up 3.6% so far this week and hog weights are rising. Underlying support continues from China reporting new outbreaks in African swine fever this week. China has culled 200,000 pigs following 41 African swine fever outbreaks since August, a Chinese animal health official said on Friday. Hog prices are expected to climb ahead of the February Lunar New Year festival because of the disease outbreak, an official at the Ministry of Agriculture and Rural Affairs said Friday. However, he added that price increases would be limited as overall hog production in China remained “sufficient.”



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