Ahead of the Open: Quiet Trade Expected Before USDA Reports Later This Morning

Posted on 08/10/2018 7:52 AM

Grain Calls 

Corn: Steady down 1 cent

Soybeans: Down 2-5 cents

Wheat:  Mixed


General Comment: A plummeting Turkish lira to a record low sent global equities lower and the dollar to a 13-month high this morning, as rising fears of a wider fallout sent investors scurrying for the safety of assets such U.S. government bonds. The stronger dollar has cast a negative shadow over the ag markets this morning ahead of the USDA’s first survey-based crop forecasts at 11:00 CT this morning.

On the trade front, China's top newspaper lashed out at recent internal criticism that Beijing's hardline treatment of its trade dispute with the U.S. leading to tougher measures from Washington. Also, China’s vice agriculture minister tried to sell China’s ability to meet domestic vegetable oil and soybean meal demand without U.S. supplies. He said imports of U.S. agricultural products will fall sharply once Beijing implements its retaliatory trade measures. On another trade front, China’s reliance on imported oil prompted the government to remove U.S. oil from the latest $16 billion 25% tariff list today. The U.S. will be the single largest source of new oil supplies outside of OPEC as some Iranian oil supplies will be curbed after the U.S. re-imposed sanctions on Iran.


Corn reopening seen mixed to fractionally lower after quiet dealings overnight. Traders are expecting USDA to raise U.S. corn yield from 174 bu. per acre forecast in July to more than 176 bu. Traders will also watch for the size of cuts in global crops and how the agency sees that impacting on U.S. exports, which are running very strong. China raised its 2018 corn crop estimate nearly 2 MMT to 211.45 MMT in its monthly Agricultural Supply and Demand Estimates report. That would still be down 4.44 MMT from last year’s crop and well below the 225 MMT forecast from USDA in July, which will be updated today.  

Soybeans seen starting lower in anticipation of USDA raising U.S. yields and projecting a record crop. Both U.S. and global carryover forecasts expected to be raised to new records. The trade battle with China continues with few signs of an early end to tariff war. Still, export sales and shipments of soybeans and soybean meal remain strong, providing underlying support ahead of the USDA’s new estimates.  This morning, USDA announced exporters sold 80,000 MT of old-crop soybeans and 130,000 MT of new-crop supplies to unknown destination.

Wheat seen lower to start on the dollar rally and concern the USDA may not show the full extent of adverse weather in its updated global crop production forecasts later this morning.  Russia’s wheat crop cut to 68.4 MMT from 69.6 MMT estimated earlier, consultant SovEcon said Friday. The Russian economy minister said Friday that rising wheat prices and a weaker ruble could boost consumer inflation above 3% in August from 2.5% in July.  Ukraine set its 2018-19 wheat export limit at 16 MMT, half being milling wheat and half feed wheat. In 2017-18, Ukraine exported 17.2 MMT of wheat, including around 10 MMT of milling wheat.


Livestock Calls

Cattle: Steady to weak

Hogs:  Higher


Cattle will open steady to weaker on further liquidation of long cattle/short hog spreads after traders pushed cattle to a excessive premiums relative to hogs. Weaker cash markets this week also adds to the negative tone today. Wholesale beef prices were mixed Thursday with Choice up 33 cents and Select falling 77 cents.  Sales were moderate to good.


Hogs futures seen opening firmer after posting strong gains Thursday, forming key reversals to the upside after falling to new contract lows. Followthrough gains to finish this week needed to confirm yesterday’s positive price action. Wholesale pork rose 48 cents Thursday after falling to the lowest since early May a day earlier. Sales slowed after active movement earlier this week.  Cash hogs fell $1.34 on Thursday with slaughter up 2.7% to 1.772 million head the first four days of the week from a year ago.


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