Ahead of the Open: Soy, Wheat Firm on Bargain Buying, Corn Weaker on Favorable Weather

Posted on Wed, 05/20/2020 - 06:19

GRAIN CALLS

Corn: Down 1 to 2 cents
Soybeans: Up 4 to 6 cents
Wheat: Up 3 to 6 cents.

GENERAL COMMENTS:  Soybean futures are trading at five-session highs as traders awaited more news on Chinese imports and the wider impact on demand from the reopening of the global economy. Corn is slightly weaker but off earlier lows after failing to sustain a rally Tuesday. Corn bulls are having a difficult time building momentum from signs of improved gasoline demand that is helping to slowly boost ethanol production as active planting progress and few weather risks for the U.S. crop are keeping pressure on the markets. News flow is light ahead of today’s weekly ethanol production data and Thursday morning’s weekly export sales report.

Wheat seen rebounding on bargain buying amid rising crop risks in the U.S., EU and the Black Sea region. Rains are in the forecast maps again, but the coverage looks limited and will not offset the deficits that have been building. Cool temps have minimized the damage so far but as we get into June and July the market may have stop going down. Russia continues to see record high domestic wheat and flour prices and this does not look to change much until new crop supplies start to hit the market in July  

Chinese purchases of U.S. soybeans and corn earlier this month had raised hopes of an acceleration in exports as part of a trade agreement, but a lull in new sales announcements has tempered market optimism this week.

The daily USDA export sales reporting service announced failed to announce any new large sales of grains or soybeans by private exporters this morning. The lack of new sales to China this morning may limit further gains after soybean and wheat prices rallied overnight. 

Wall Street is set to open sharply higher on Wednesday as investors clung to hopes of a recovery from a coronavirus-fueled slump amid signs of more stimulus for ailing sectors, while retailer Lowe's jumped on upbeat quarterly results as coronavirus lockdowns led people to spend more on home remodeling and repairs. The U.S. stock market has now rallied more than 30% from March lows on unprecedented stimulus, but gains have been limited this month as traders digest mixed headlines on progress in developing a coronavirus vaccine. The S&P 500 tumbled 1% in the final hour of Tuesday's session after a report raised doubts about positive results from Moderna Inc.’s early-stage trial for a vaccine to prevent against the respiratory disease. Prices fell on the lack of a press release from the U.S. National Institutes of Allergy and Infectious Diseases, which partnered with Moderna on the trial, as well as experts who said they were waiting to see more data from the company before drawing a conclusion.

Treasury Secretary Steven Mnuchin spoke in favor of a wait-and-see approach to more federal aid, while Federal Reserve Chairman Jerome Powell suggested more will be needed. The two officials commented on future aid needs during a Senate hearing on Tuesday.

Meanwhile, Brazil reported a record day for infections, turning the country into the world's fastest-growing hotspot for the pandemic. President Donald Trump said he is considering a ban on Brazilians travelling to the U.S., the country with the highest number of infections globally. Elsewhere in emerging markets, the biggest cyclone in two decades is set to hit India and Bangladesh today, leading to mass evacuations which will likely complicate efforts to control the virus there.

Thousands of sports fans who can't gamble on their favorite teams are reportedly flocking to the stock market instead. Charles Schwab, ETrade and Interactive Brokers together added roughly 780,000 new customers in March or April.

CORN: July corn jumped to a four-week high on Tuesday but closed near session lows, giving back most of the early-session gains. If corn posted “climaxing bursts” on Tuesday, action was a warning. Bulls must see a close above Tuesday’s highs just to keep modest rebounds on the table. 

SOYBEANS:  July beans opened lower last night but then rebounded back in the green ahead of the break. Low weekly closes in beans and meal may well be the last straw that renews bear markets. Friday’s closes will be important near-term directional indicator.

WHEAT:  Wheat is trying to rebound from key support at $5.00 in SRW July futures and $4.40 in July HRW futures. The Kansas wheat crop tour, this year compiled online and based on yield checks by KSU crop experts, farmers, and advisers,  estimated day one HRW yields at 41.1 bushels per acre (bpa) in north-central Kansas and 51.7 bpa in northwest Kansas with both regions hit earlier by drought and frost. the USDA has the statewide average wheat yield at 47.0 bpa. The tour report yesterday also had comments on the Colorado and Nebraska crops. In Colorado, they noted the poor conditions and put the crop at 54 million bu. which would be about 7 million less than the recent USDA estimate and well below last year’s 98 million. In Nebraska, scouts estimated the crop size at 42 million bu., down from last year’s 55 million. Russia is expected to harvest about 120 MMT of grain in 2020, Agriculture Minister Dmitry Patrushev told a government meeting on Wednesday. The Agriculture Ministry previously expected the crop at 125.3 MMT and 121.2 MMT last season.

LIVESTOCK

CATTLE: Steady to weak

HOGS: Steady to weak

Cattle:  Live cattle may pause but charts remain positive and futures are trading a wide discount to cash markets. This week’s showlist is again large and beef prices sliding but from sky-high levels. Choice boxed beef plummeted $19.37 and Select dropped $24.19 on Tuesday, though both values are still well above prior record highs. Movement has picked up on the retreat, which 179 loads changing hands yesterday. So far, there have been a handful of live cattle sales at $115 in the Iowa market, and several hundred head traded in Nebraska between $119 and $120. Packer profit margins are near $1,000 a head and the industry are under heightened scrutiny from the Justice Department, USDA and the public.

Hogs: Futures seen steady to weak to begin trading but market is at a point where support should bring in some bargain buying. Cash hog bids climbed an average of $1.34 on Tuesday, with packer processing picking up. Slaughter estimated at 397,000 head on Tuesday, up 36,000 head from last week but still 69,000 head below year-ago levels. And wide profit margins give packers plenty of room to pay up for supplies. That said, the recent processing disruptions mean market-ready hog supplies are plentiful, despite the culling of some herds. The pork cutout value tumbled $9.76 on Tuesday, dropping back under the $100 per cwt. level. roughly $20 declines in bellies and loins drove the decline. China will auction another 10,000 MT of pork from state-owned reserves May 22. The country has now sold 320,000 MT of pork from reserves so far this year as it seeks to assure pork supplies in the wake of a fall in output due to African swine fever.