Ahead of the Open: Soybeans Down Amid Rising Global Supply; Wheat Firms on Smaller World Crops

Posted on 07/13/2018 8:03 AM

Grain Calls

Corn: Down 1-2 cents

Soybeans: Down 7-10 cents

Wheat: Mixed to mostly firmer

 

General Comment:   China's trade surplus with the U.S. swelled to a record of nearly $29 billion in June, a result that could further inflame trade tensions with Washington. Meanwhile, a China foreign ministry official said Friday that Beijing is committed to working with the US on denuclearizing North Korea. This offers hope that political talking lines are still open for negotiations on US-China trade. Midwest heat begins to break today from the northwest and will move into the east by Sunday. Showers will accompany the front with variable coverage. Weather leans negative for corn and soybeans.

 

Corn futures seen on the defensive to start today after yesterday’s rally failed to generate new buying overnight. The USDA cut world corn production for both 2017-18 and 2018-19 Thursday, reducing global reserves and boosted the U.S. export outlook. That’s a long-term positive story but traders are focused on cooler, wetter weather after December futures failed to close above resistance at $3.60 on Thursday’s rally and matched the price overnight before turning lower.

 

Soybeans are poised to test the contract lows set Thursday this morning. November beans fell to a low of $8.38 before closing up a penny $8.49 1/4.  USDA forecast U.S. soybean inventories will rise to the highest ever as the trade dispute with China, the world's largest buyer of the oilseed, will cut into exports. No clear timeline for talks to end the trade spat continues to limit buying while weather gives bears ammunition to sell rallies.

 

Wheat futures will begin with a firm tone in winter wheat futures on falling global outlook. USDA raised its outlook for U.S. wheat exports and lowered production forecasts for rivals Russia and the European Union. The best available supply of world wheat will be in the U.S. However, with U.S. export sales 30% behind a year ago, the market need evidence of improved overseas buying from the U.S.  Spring wheat seen defensive amid beneficial weather to add to the bigger crop USDA forecast on Thursday.

 

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to firm

 

Cattle seen starting firmer on carryover buying from firm close Thursday, attempting to claw back early week losses. No trend yet for cash cattle trade and beef was lower on Thursday. Market will be waiting for cash market direction with underlying support likely to continue from higher export forecasts from USDA for both 2018 and 2019 in yesterday’s monthly supply and demand forecasts. Cargill doubled quarterly profits as revenues rose 7% in part because of improved beef exports.

 

Hogs seen opening a little firmer after the strong recovery yesterday. Wholesale pork carcass values slipped 9 cents as strength in loins offset losses in ribs, hams, picnics and bellies. That’s a positive sign as loins have been a drag on hog demand. Cash hogs fell $2.44 in Iowa/Minnesota Thursday with the national average price declining 88 cents. The emotional selloff amid overhyped concerns about what Chinese tariffs may do to U.S. pork exports may have peaked. USDA made no change to its export outlook for pork yesterday putting a floor under heavily discounted futures.

 

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