Ahead of the Open: Quiet Day Before USDA Supply And Demand Reports on Thursday

Posted on 11/07/2018 8:10 AM

Grain Calls

Corn: Steady to weak

Soybeans: Steady to mixed

Wheat: Steady to mixed

General Comment:  Donald Trump faces greater restraints on his presidency after Democrats won control of the U.S. House of Representatives and pledged to hold the Republican accountable after a tumultuous two years in the White House. Republicans expanded their control of the U.S. Senate in Tuesday's midterm elections. The Democrats could force Trump to scale back his legislative ambitions, most likely derailing a second major tax-cut package and maintaining his hardline policies on trade. Still, Trump lost fewer seats in the House than either former Presidents Bill Clinton and Barack Obama did in their first mid-term elections. While Trumped called it a big win, the did get a warning signal from the Midwestern and Rust Belt states that handed him the presidency. Democrats in Pennsylvania, Wisconsin and Michigan swept the races for Senate and governor, and picked up valuable House seats, defeating Trump-backed Republicans. The impact on trade talks with China is uncertain ahead of Trump’s meeting with China President Xi Jinping at the end of November. More likely the dinner meeting will be the start of a negotiation than a place for a deal. China stocks fell today with weak company earnings and an uncertain economic outlook outweighing government pledges of support for wavering markets. Nonetheless, U.S. stocks are headed for a higher start after equity values rose overseas after the expected outcome in U.S. elections Tuesday. The dollar is sharply lower and crude oil is on the rise after recent losses, providing some light support for the grain markets this morning.

Corn seen starting a little lower on positioning ahead of the USDA crop production and world supply & demand updates on Thursday. China National Grain and Oils Information Center today unexpectedly increased its corn planted area and production forecasts for the past several years, potentially reducing China’s demand for imports of feed grains. The 2017 crop was raised to 259 MMT, up 20% from the official government forecast of 213 MMT.  This year’s crop was expected near 259 MMT, well above the USDA projection of 225 million.

Soybean futures seen steady to firm ahead of Thursday’s USDA Crop Production Report, which traders are looking for a small cut in yields. Strength almost should return yet this week to maintain a bullish bias even though pausing ahead of an upcoming monthly USDA report would not be unusual. China's top grain-producing province almost doubled its 2018 subsidies for soybean growers to , as Beijing seeks ways to reduce reliance on U.S. exports of the oilseed amid a trade war with Washington. Corn subsidies were slashed 81%. Heilongjiang set the 2018 corn grower subsidies at 25 yuan ($3.61) per mu (0.14 acre) and soybean subsidies at 320 yuan ($46.28) per mu. Argentina is working with China to ship more soybean meal to boost domestic processing activities that have slumped sharply as exports of the oilseed have surged, tightening domestic supplies.

Winter wheat futures seen firmer and poised to test overhead resistance with spring wheat futures already moving to the highest since Oct. 17. Early overnight losses were checked amid fears over the condition of the American crop. The USDA said the winter wheat crop was 84 percent seeded, lagging the five-year average of 90 percent. With cold temperatures in the Plains and Midwest forecast for next week is leading to traders reducing planted acreage estimates as many producers are looking at planting after full crop insurance benefits in adverse conditions. Prices also supported by expectations for USDA to trim output in Australia, EU and Canada in Thursday’s monthly update.

Livestock Calls

Cattle: Steady to weak

Hogs: Steady to weak

Cattle futures may start on the defensive as a very light cash cattle trade developed at $113.00 on Tuesday, down from $114.95 late last week. However, wholesale beef values gained Tuesday with Choice up 22 cents and Select jumping $2.21. Movement was good at 127 loads.   This week’s slaughter is up 4,000 head from both last year and a week ago. It would be ideal for live cattle to further pare this week’s losses by the close on Friday as this is usually the time for winter strength to emerge. 

Hog futures seen steady to lower this morning. National average cash hogs were 55 cents lower and pork carcass cutout values fell 78 cents. Although pork sales jumped with the lower prices. Slaughter this week is up 22,000 from a week ago and 34,000 head larger than a year ago. China’s Agriculture Ministry confirms a new African swine fever outbreak in Hubei province today.

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