Ahead of the Open

Posted on Tue, 12/10/2019 - 09:52

Grain Calls          

Corn: Steady to Mixed

Soybeans: Steady to up 2

Wheat: Steady to down 2 cents

 

GENERAL COMMENTS:  Soybeans are moving slightly higher extending it rally to a sixth session while grains grind sideways. USDA releases its December WASDE Report at 11 a.m. CST. There will not be a U.S. crop update, but USDA will update world production and demand forecasts. Traders are looking from small changes in today’s report. On average, traders polled see slightly higher world corn and soybean ending are forecast but smaller forecasts for world wheat inventories. However, the ranges on both corn and soybeans is wide and that could lead to surprises later today.

Brazil’s USDA agency today raised its corn and soybean production estimates from last month. Conab projected the soybean crop at 121.092 million metric tons (MMT), up from 120.860 MMT estimated in November and above the 105.030 MMT harvested last year. Corn production projected at 98.409 MMT, up from 98.366 MMT estimated in last month but down from 100.046 MMT last year.

The ebbs and flows of the U.S.-China trade negotiations continue and this morning spin positive with the Wall Street Journal reporting this morning that the two sides have agreed to delay the U.S. implementation of new tariffs on Dec. 15. Maybe China has agreed to the large ag purchases the White House has been demanding.  Markets would like to hear more confirmation of the delays.

U.S. President Donald Trump does not want to implement the next round of scheduled tariffs against Chinese goods on Dec. 15, but he wants "movement" from China to avoid them, U.S. Agriculture Secretary Sonny Perdue said on Monday at a National Grain and Feed Association conference in Indianapolis.

Beijing said on Friday it would waive import tariffs for some shipments of soybean and pork from the United States but did not specify quantities. Chinese soy importers bought at least five bulk cargo shipments of U.S. soybeans, or about 300,000 metric tons (MT), for shipment in January and February after Beijing offered buyers at least 1 million metric tons (MMT) in new tariff waivers, U.S. exporters told Reuters.

The USDA daily export reporting service did not report any new larger private U.S. exporter sales this morning.  That may be a bit negative for the market but the new sales rumored yesterday could show up on Wednesday.

Meanwhile, odds increasing for passage of the new NAFTA legislation this year. House Democrats reportedly reached a tentative agreement with the White House over changes to the U.S.-Mexico-Canada Agreement (USMCA). House Speaker Nancy Pelosi has scheduled to hold a news conference at 9 a.m. CT today. Canadian Deputy Prime Minister Chrystia Freeland will join U.S. Trade Representative Robert Lighthizer and Jared Kushner in Mexico City on Tuesday to finalize the deal. "We're doing very well on USMCA," Trump told reporters at the White House Monday afternoon. "A lot of strides have been made over the last 24 hours."

Several U.S. procedural hurdles must be cleared before the agreement can come to the House floor for a vote, including committee hearings and review of the implementing bill in the House Ways and Means and Senate Finance committees.

Another trade front, a 20-year global moratorium on imposing tariffs on digital trade could end next week if India or South Africa makes good on threats, according to trade officials and documents, potentially forcing people to pay duties on software and movie downloads. since 1998, World Trade Organization (WTO) members have renewed a ban on import duties on so-called "electronic transmissions", worth up to $255 billion a year by one estimate. Pressure is now growing to lift the ban as more books and movies become digital, potentially reducing revenues further. It will be voted on next week and renewal requires full consensus.

The Federal Reserve’s FOMC begins two days of meetings today. Traders widely expected no change but the comments on Wednesday from the monetary policy setting agency will be closely examined for insight into the why bank cash levels are falling and leading to sporadic liquidity crunches. Yesterday’s New York Fed liquidity operations did little to quell the outstanding worries about the health of the U.S. repo market, with all three auctions oversubscribed. The next funding crunch point is Monday Dec. 16 when the Treasury distributes new U.S. debt to investors, also the day after new tariffs on China may be implemented and could lead to a spike in Treasury yields.

Corn: Futures seen grinding sideways, building a base of support. Futures are stuck in a 15-cent range formed the past four weeks between $3.73 to $3.87. Selling interest from funds has waned on worries about the size of this year’s crop. As of Dec. 8, USDA says corn harvest advanced three percentage points to 92% complete, whereas the five-year average is 100%. That implies there were still 6.5 million acres of corn left in fields.

Soybeans: Futures are bouncing back from deeply oversold levels after aggressive fund selling. Short-covering continues to develop amid the Chinese efforts reach a deal by opening its markets to more tariff-free soybean imports. Still, weather in Brazil remains good and offsets the concerns about dry weather hurting crops in Argentina.

Wheat: Winter wheat futures are stuck in narrow ranges ahead of USDA’s updates and Egypt’s tender results. The lowest offer in Egypt’s state buyer GASC international tender to buy an unspecified quantity of wheat came from France today. Russia, Ukraine and Romania all offered wheat to Egypt, but U.S. remains uncompetitive.

 

Livestock Calls

Cattle: Mixed

Hogs: Steady/firm

Cattle: Futures will wait to see if cash bids rise again after gaining 71 cents last week. Wholesale boxed beef prices fell again on Monday with Choice down 92 cents and Select sliding 81 cents. Sales were moderately active. Choice fell to the lowest since Oct. 23 but remains at the highest for mid-November since 2014. Demand continues to be strong and support futures on technical corrections.

Hogs: Lean hogs may bounce on positive China trade talk progress. Pork cutout values slipped 10 cents as continued strength in picnic and hams failing to offset weakness in other cuts on Monday. Sales light to moderate.  China will sell 40,000 MT of frozen pork from its state reserves on Dec. 12, said a notice posted on the website of the China Merchandise Reserve Management Center on Tuesday. The government has recently said it will release supplies from reserves to guarantee sufficient meat for China's upcoming Lunar New Year holidays. Still, government reserve sales are far too small to make much difference in a pork shortage estimates at 13 MMT.