Ahead of the Open: No Bearish USDA Supply Surprises Thursday Support Early Grain Trade

Posted on 10/12/2018 7:17 AM

Grain Calls

Corn: Mixed

Soybeans: Up 3 to 5 cents

Wheat:  Up 1 to 3 cents

General Comment: The market rout that saw the S&P 500 Index enter its longest slide since 2016 and gauges in Asia and Europe plunge so far isn’t extending into a third day. Overnight, markets in Asia were boosted by robust China export figures that showed a 14.5% increase boosting China’s trade surplus to a record despite a 14.3% gain in imports that fell below expectations. The U.S. Treasury Department will not say that China is manipulating the value of the yuan when it publishes its twice-yearly report on currency regimes of trade partners next week, according to two people familiar with the matter. U.S. President Donald Trump and Chinese President Xi Jinping plan to meet at the G20 summit in Argentina in late November, the Wall Street Journal reported Thursday, citing officials in both countries. While traders remain cautious about any discussions about a possible meeting, the trade friction is not a negative factor. Weather conditions for U.S. corn and soybean harvesting and wheat planting expected to improve from north to south the next two weeks as light rains fall again this morning from Oklahoma to Iowa. One more rain affects the southern third to half of the central U.S. this weekend as the remnant of Hurricane Sergio merges with a cold front. Meanwhile, in South America, widespread rain breaks the dry season and further initiates planting season in northern Brazil next week.  Some rain aided Argentina overnight, and some returns in about a week, but more may be needed. Wheat yields already slipping in Argentina.

 

Corn seen narrowly mixed with underlying support from Thursday’s rally to seven-week highs. The failure to test Thursday’s high overnight triggered some light profit taking ahead of the weekend.  On Thursday, USDA reduced its estimate of U.S. corn yields, eliminating some buyer caution that supplies may rise. This month’s yield estimate implies record ear weights as ear counts per acre were cut.  Based on the very wet field conditions, the U.S. corn yield may continue to slowly come down in future reports Today’s weekly export sales report showed net new sales in the week ended Oct. 4 fell to 1.007 MMT from 1.431 MMT a week earlier. Traders were looking for 1.0 to 1.5 MMT in new business which may put some initial pressure on futures this morning.

Soybean futures are seen rising on a smaller USDA crop production forecast on Thursday. Based on all the swelling in the pod and soon to be shattering in parts of the western and northern Corn Belt, traders are expecting yields to slowly come a little over time. China imported 8.01 MMT of soybeans during September, a 1.14 MMT (12.4%) retreat from August but down just 100,000 MT (1.2%) from year-ago. The figure topped market expectations. Nine months into the calendar year, China’s soybean imports stand at 70.01 MMT, which is down 1.44 MMT (2.0%) from last year. USDA weekly export sales report this morning highlights the lack of Chinese demand for U.S. supplies. Sales were 439,651 MT last week, down from1.442 MMT a week earlier and well below the 800,000 MT to 1.3 MMT expected by traders.

Wheat futures seen higher after USDA trimmed its estimate of production in Russia and Australia in Thursday’s monthly supply and demand report. World carryover supplies were also reduced.  Rising prices in Russia have improved prospects for European Union wheat shipments this season despite limited supplies after a weather-hit EU harvest, Strategie Grains said. No improvement in U.S. sales last week. USDA reported 339,022 MT sold last week, 30% less than the prior four-week average and the lowest in seven weeks.

 

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to weak

Cattle futures seen starting steady to firmer after futures rebounded from lowest since Sept. 14 yesterday and beef prices rose from the lowest since December. Choice beef prices rebounded 40 cents on Thursday and Select gained 72 cents. Negotiated cattle trade was weaker on Thursday and will limit rallies.  Slaughter was 468,000 head the first four days of this week, down 10,000 head from a week ago and 3,000 head smaller than a year earlier. Packers appear to be in no hurry to boost supplies in a falling beef market. Beef exports in week ended Oct. 4 fell 18% from the prior week and were 10

Hog futures seen steady to lower Friday on carryover selling from as prices fell to the lowest in more than three weeks yesterday. Iowa/Minnesota cash bids fell 93 cents Thursday with the nation prices marked 73 cents lower. Wholesale pork carcass prices fell 59 cents yesterday as sales slowed amid rising slaughter rates. Slaughter catching up after some plant problems earlier this week with 1.862 million head this week, up 1,000 from a week earlier and 17,000 head more than a year ago. Another case of African swine fever confirmed in Tianjin located southeast of Beijing, the Ministry of Agriculture said Friday. It was the second case reported this week in China. The outbreaks may help to put a floor under prices. U.S. pork sales last week rose 14% from the prior week but were still 21% below the previous four-week average.  

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