Ahead of the Open: Soybean, Corn May Rally on New Sales to China; Rains May Aid Global Crops

Posted on Wed, 10/14/2020 - 06:21

GRAIN CALLS

Corn: Steady to mixed
Soybeans: Up 4 to 7 cents
Wheat: Down 4 to 6 cents

GENERAL COMMENTS:  The lack of follow-through weakness Tuesday in corn and soybeans was encouraging but corn was back under pressure overnight while beans recovered more of Monday’s steep declines. Wheat is sliding lower this morning on rapid U.S. planting progress and some rains in the forecast for the Black Sea region next week. The bulls and bears are likely to watch the markets thrash back and forth in consolidation, waiting on actual rainfall amounts and coverage in South America and Russia next week.

Before the reopening, USDA’s daily export sales reporting service announced 420,000 metric tons (MT) of corn was sold to China and another 264,000 MT of soybeans sold to China. The markets will be supported by the confirmation of rumors earlier this week of China corn buying and new soybean purchases.

Chinese corn futures hit a new record today of 2,566 yuan (380.70) per metric ton, as the market remains concerned about crop damage from typhoons earlier this year and dwindling stockpiles of the grain. This contrasts with assurances from the Chinese government that production was not impacted, and stockpiles are adequate.   

The U.S. corn harvest hit 41% complete this week, up from 25% last week, 20% last year, and the 32% five-year average; while ratings fell a point to 61% “good/excellent” condition. Soybean harvest rose from 38% to 61% this week, up from 23% LY and the 42% five-year average. Ratings there also fell a point to 63% rated “good and excellent” condition. U.S. winter wheat planting and emergence remained ahead of their respective comparable averages at 68% and 41%, respectively.  

Brazilian rains will increase center-west through next week, and more widespread in the 11- to 15-day outlook, with dryness remaining north. Argentina will trend wet north and dry south through the extended time frames. Only 3.0% of intended soybean acres had been planted in Brazil’s top-producing province of Mato Grosso as of Oct. 9, which compares to 18.8% last year at this time and the historical average of 16.6% seeded for this point in the season, according to the state agricultural body Imea. Dry weather has delayed planting and rainfall over the weekend and so far this week has been patchy. Several fronts are expected to bring more precipitation to the region in the days ahead, but again, relief is not expected to be uniform.

The weather outlook for Russia and Ukraine continues to improve with today’s GFS models now showing some decent volumes of rain over both southern and central regions of Russia and even heavier rains over most of Ukraine. Expect this to ease concerns over next year’s crop and accelerate plantings.  

US export inspections for the week ending Oct. 8 were; 24.9 million bu. of corn, 79.2 million bu. of soybeans, and 18.9 million bu. of wheat. China was the destination for 75% of the total soybean shipped last week and took just one cargo of corn – not as much as expected. China also took one cargo of U.S. wheat last week. 

Corn:  December futures traded both side of unchanged overnight but were mostly in the red with prices trading inside of yesterday’s range. Short-term support remains at $3.85 ½ with strong support at $3.77.  This week’s high at $3.99 ¼ is key overhead resistance.

Soybeans:  November beans traded higher after opening lower last night. Prices are back above short-term resistance at $10.46 ¾ at the break with strong resistance at the Sept. 9 high at $10.79 3/4. U.S. soybean crushing likely dropped in September to the lowest monthly level in a year, while soyoil stocks fell to a 13-month low, according to analysts polled ahead of a National Oilseed Processors Association (NOPA) report due on Thursday. If the average estimate of 160.8 million bu. is realized, it would be down 2.6% from the 165.055 million bu. crushed in August but up 5.4% from the September 2019 crush of 152.566 million bushels. It would also be the largest September crush on record, just ahead of the month's biggest-ever crush, 160.779 million bushels, set in September 2018. Malaysian palm oil futures fell on Wednesday after seven consecutive day of gains, as low biodiesel consumption in top producer Indonesia and expectations of a decline in exports weighed on sentiment.

Wheat: Wheat futures are weaker this morning. December SRW futures are holding above this week’s low, but December HRW futures fell to a six-session low overnight. Russian 12.5% wheat is offered for November/December at $247/MT or $6.72/Bu which is steady from prior days. French wheat is cheaper at $244/MT while US HRW Gulf wheat is offered at $268/MT – a new 5 year high.  Wheat traders are rightly focused on the SW Russian weather forecast where rain is needed for seed germination. Yet, world wheat prices are not backing off with Russian interior flour prices at new record high. It will be difficult to break US wheat futures prices until world wheat prices seasonally peak and start to retreat.

LIVESTOCK 
Cattle: Mixed-firm
Hogs: Mixed-firm

Cattle: Futures trading sharply lower early yesterday but came roaring back to close higher. Resilient close boosts the outlook that cattle futures completed the corrective breaks and can begin a seasonal rally. Keys are closing above last week’s highs. Feeder cattle also appear to be in good position to be establishing multi-month lows to continue in a trading range. Yesterday’s price performance was surprising because both beef and cash cattle were lower. Choice beef cutout fell $2.18 and Select was down 26 cents. Sales were moderately active. Cash cattle traded down $1.00 to $1.50 lower on average from last week.

Hogs: While hogs closed slightly lower on Tuesday, it was well off earlier session lows. Prices held above upside gap support left from Sept. 8. That means a December futures’ close below $64.80 would be a negative signal. Cash hogs were mixed with the national average down 19 cents, but Iowa/Minnesota gained 53 cents. The CME Lean Hog Index continues a firming trend reaching $78.14 yesterday. The wholesale pork cut out value rose another $1.59 on Tuesday, supporting the CME index.  Slaughter the first two days of this week is down 10,000 head from both last week and a year ago. Average hog weights in Iowa/Minnesota rose to 284.3 lbs. last week, up from 283.4 lbs. a week earlier and above 283.6 lbs. on average a year earlier.