Ahead of the Open: Quiet, Mixed Trade Expected in Grains, Soybeans Ahead of Friday's USDA Report

Posted on 08/09/2018 8:11 AM

Grain Calls 

Corn: Steady to up 1 cent

Soybeans: Mixed

Wheat:  Down 6 to 9 cents


General Comment:  China state media on Thursday accused the U.S. of a “mobster mentality” in its move to implement tariffs on China goods and warned Beijing will fight back. China’s moved this week to put tariffs on U.S. liquidfied national gas, a booming U.S. export, marking the latest gamble by China to get President Trump to blink first and another sign that trade tensions will last longer.

However, there may be some signs of a rift developing in the China leadership. An unusual increase in criticism may be building in China over President Xi’s handling of economic policy and the nationalistic stance on trade issues, Reuters said citing four unnamed sources close to the government. Pressure is also growing in China as its stock market has been one of the world’s worst-performing in 2018, losing its ranking as the second-biggest market after overtaking Japan in 2014. China’s inflation data was higher than expected in July including a 0.5% increase in food prices last month, despite a 9.6% drop in pork prices. U.S. weather is slightly threatening. Drying affects about half the corn and soybeans through Aug. 15 and may continue through Aug. 22 for a third of the northwest belt, according to T-Storm Weather. Scattered rain reached the remainder of the belt with cooler temperatures next week.


Corn reopening seen steady to firm after a quiet trade overnight inside of Wednesday’s range. Support continues from rising demand and concern that the dry Midwest weather since July will reduce kernel fill and the size of the U.S. crop. USDA is expected to raise national yields to 176.3 bu. per acre from 174 estimated in July. Friday’s USDA report will be based mostly on plant populations and use normal ear weights, which may put output near the record yield set in 2017. It took a near-perfect fill period in 2017 to produce record yields last year, which will not be repeated this year. Brazil government cuts corn crop estimates to 82.18 MMT today, down from 82.92 MMT in July and 97.84 MMT last year.


Soybeans seen mixed this morning as traders take some profits before of the USDA’s first field-based crop forecasts on Friday. No signs of any talks to settle the U.S.-China trade war also increase uncertainty about U.S. exports despite strong demand outside of China.  This morning’s weekly exports sales in the week ended Aug. 2 were better than expected and a supporting feature. Earlier today, the Brazil government raised its soybean crop estimate to 118.98 MMT from 118.88 MMT in July and 114.08 MMT last year. Both Brazil and the United States set monthly records for soybean exports in May and June, shipping nearly 6 MMT more than the same period a year ago. But China reported this week its July imports fell 21 percent to 8.01 MMT from July 2017, and the smallest monthly intake since April. USDA announced exporters sold 135,000 MT of soybean meal to the Philippines for delivery in the 2018-19 marketing year.


Wheat seen lower as prices consolidate near recent highs ahead of the USDA supply and demand report on Friday. Traders are taking some profits after the recent strong rally in Chicago and world wheat prices. The market will be focused on the agency’s latest world production and global shifts in exports. Strategie Grains slashed its EU soft wheat crop estimate another 4.7 MMT amid “catastrophic” yields in northern Europe. The consulting firm now estimates the 2018 crop at 127.7 MMT, which would be down 14.1 MMT (9.9%) from last year. Dry weather threats developing in Canada and Australia unlikely to be fully reflected in the USDA report tomorrow.


Livestock Calls

Cattle: Steady to higher

Hogs:  Steady to weak


Cattle will open steady to firmer on stronger beef prices Wednesday and better weekly exports. USDA reported this morning that  sales of beef rose to 14,600 MT, up 15% from the prior 4-week average.  Cash trade is very light to start this week with prices down $1 to $2.50 from the bids seen late last week. Only 5,670 head sold this week, down from 7,014 head during the same period a week ago and down from  32,097 a year ago.


Hogs futures seen steady to weaker amid the ongoing downtrends in cash hog markets and wholesale pork prices. Average cash pigs were $2.16 lower Wednesday while hog carcass values fell $1.08.  Pork sales have improved this week, but it has yet to put a bid back into the cash markets. Packers have slowed slaughter this week in effort to support pork prices. Slaughter this week is 1.31 million head,  down 2.5% from last week and still up 2.4% from a year ago. Some support should emerge from a second week of good U.S. export sales. USDA reported today that sales last week rose 16% above the prior four-week average.

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