Ahead of the Open: Grains Mixed in Quiet Dealings Before Key USDA Reports on Friday

Posted on 02/06/2019 7:48 AM

Grain Calls

Corn:  Steady to mixed
Soybeans: Steady to mixed
Wheat:  Steady to mixed

General Comment: Grain markets are exceptionally quiet and stuck in very narrow ranges waiting for the USDA updates on 2018 final crop sizes, Dec. 1 inventories, winter wheat seeded acreage and global supply and demand updates. The market is looking for smaller U.S. corn and soy crops and ending stocks and a smaller Brazilian soybean crop. Financial markets are also quiet with gold and oil slightly lower, the dollar a bit a stronger and global stocks mixed but off the day’s lows.

The grain markets are also looking ahead to the resumption of the U.S./Chinese trade talks next week. President Donald Trump’s State of the Union address reiterated that any new trade deal with China "must include real, structural change to end unfair trade practices, reduce our chronic trade deficit and protect American jobs." The next round of talks in Beijing will be led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. Bilateral talks have centered on addressing U.S. demands for deep structural changes to China's economic and trade policies, including new protections for U.S. intellectual property, ending forced technology transfers, reining in China's subsidies for state industries and increasing Chinese purchases of U.S. farm, energy and manufactured products. Trump said last week in Washington that he would meet with Chinese President Xi Jinping in coming weeks to try to seal a comprehensive deal, possibly as part of a trip to meet North Korean leader Kim Jong Un. That summit will take place Feb. 27 and 28 in Vietnam, Trump said on Tuesday but did not give a date for a meeting with China’s Xi to complete the trade deal.

The USDA on Wednesday confirmed private exporter sales of 523,00 metric tons (MT) U.S. soybeans to China for delivery in the marketing year that ends Aug. 31 and 63,000 MT for delivery in the 2019-20 season. USDA also reported sales of 182,000 metric tons of soybeans to unknown destinations for delivery this morning year.  That follows Tuesday’s announcement of 2.603 MMT announced Tuesday and 612,000 MT announced sold to China on Monday. The total Chinese purchases are getting close to the 5 MMT pledge last week by China. However, the purhase for next marketing year was disappointing because its does suggest shipments of these sales may slow to leave U.S. port or could be canceled if no deal is reach by the March 1 deadline.   

Weather leans price-negative. Forecasts see rains for southern Rio Grande do Sul and to most areas north of Parana this week with average rainfall in most growing areas next week. Argentina’s weather outlook is mainly dry through most of the weekend before rain increased in most areas later Sunday and into Monday. Forecast then turn dry for the rest of next week.

Corn is seen starting fractionally weaker and likely to find some light buying ahead of Friday’s USDA report. Call buying Tuesday helped to support the market.

Soybeans seen mixed as large global inventories limit rallies as China trade deal optimism provides underlying support.

Wheat futures will start mixed to weaker waiting for the long-anticipation upturn in export demand. In the 2018 calendar year, Russia exported 44.0 MMT of wheat, up 10.8 MMT (32.5%) from the previous year, based on official customs data. With prices on the rise, the U.S. has a 3 to 4 month period to grab some market share before new-crop supplies become available in Russia.  

Livestock Calls

Cattle: Steady to weak

Hogs: Mixed to weaker

Cattle futures seen following the lead of the wholesale beef markets where choice fell 63 cents and Select dipped 31 cents. Sales improved but demand was still called light to moderate. Market is looking for signs of stronger demand to support the cash market. Market is also waiting on delayed USDA export data over the next several weeks to get a clear picture on overseas demand that finished 2018 on a strong note.  

Hog futures seen mixed after the volatile two days to start this week. Increased volatility usually marks a possible change in trend ahead. Cash hogs mixed Tuesday with the national average prices 39 cents lower but the Iowa/Minnesota cash hogs up 23 cents.  Slaughter the first two days of this week is up 2.9% from a year ago. Fresh pork carcass prices fell $1.90, with most cuts lower and continued weakness in belly, ham and loin prices. Carcass prices fell to the lowest since Nov. 19. Supplies are exceeding demand but fully factored into current oversold futures prices.

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