Ahead of the Open: Soybeans Top $10 Overnight

Posted on Mon, 09/14/2020 - 08:02

GRAIN CALLS

Corn: Steady to 1 cent higher
Soybeans: 3 to 5 cents higher
Wheat: Steady to 1 cent higher

GENERAL COMMENTS: Traders are still digesting USDA’s report data from last Friday. The general thought is USDA’s September estimates will be lowered again in October given the poor finish in many areas. Weekly crop condition ratings for corn and soybeans are expected to be little changed overall, with some states expected to drop while others may improve a little.

Funds continue to pump money into the long side of the soybean market. As of Sept. 8, managed money accounts were net long 173,907 soybean futures and options, up 11,200 contracts from the previous week. Funds likely added more than 20,000 contracts to that position the final three days last week. That’s the most bullish fund stance for this time of year since 2012.  Money managers extended their net long in corn futures and options to 33,494 contracts. Funds reduced their net long position in SRW wheat to 23,175 futures and options contracts.

China’s ag ministry raised its forecast for corn imports for 2020-21 to 7 MMT, citing a “significant increase” in U.S. shipments. That matches USDA’s forecast. But China already has slightly more than 8.8 MMT of new-crop U.S. corn purchases on the books. USDA’s Chief Economist told us his department assumes policy that is currently in place and China has not indicated any additional corn import quotas have been allocated. The official also indicated USDA is watching for changes in shipment data rather than sales.

USDA announced the following this morning: Program Announcement FAS-ESR-088-20, issued at 9:00 a.m. on August 27, 2020, which announced export sales of 140,000 MT of corn for delivery to unknown destinations during the 2020-2021 marketing year has been corrected to reflect a change in destination. The corrected announcement is as follows:

  • Private exporters reported to the U.S. Department of Agriculture export sales of 140,000 metric tons of corn for delivery to China during the 2020/2021 marketing year.
  • Export sales of 350,000 metric tons of corn for delivery to China during the 2020/2021 marketing year;
  • Export sales of 106,000 metric tons of corn for delivery to Japan during the 2020/2021 marketing year;
  • Export sales of 129,000 metric tons of soybeans for delivery to China during the 2020/2021 marketing year;
  • Export sales of 318,000 metric tons of soybeans for delivery to unknown destinations during the 2020/2021 marketing year.

Corn: December corn futures pushed above last Friday’s high overnight. The contract is now into a band of resistance from $3.70 to $3.87. With funds long the corn market, fresh bullish news is needed to sustain the price rally. The July double-top at $3.63 is now support.  

 

Soybeans: November soybean futures pushed above $10.00 overnight but failed to find sustained buying above that psychological level and finished the session well off the highs. That’s the first time soybeans have been above $10 in two years. Whether bulls can uncover fresh buying above this level will determine if the uptrend is extended or if corrective selling creeps into the market.

 

Wheat: Two-sided trade was seen in the wheat market overnight. Wheat needs help from corn and soybeans to push higher today. And wheat could face light pressure if buyer interest in those other two markets is light.  

 

LIVESTOCK
 

Cattle: Mixed
Hogs: Higher

 

Cattle: Live cattle futures should be mildly helped by expected strength in lean hog futures, while feeder cattle are likely to favor the downside amid strength in the corn market. We don’t anticipate strong buyer interest in live cattle, as cash cattle and boxed beef prices are softening and futures hold premiums to the cash market. Cash cattle traded around $102 in the Southern Plains Friday, while Choice beef prices dropped 94 cents and Select was 22 cents lower. But packers moved 164 loads of beef at the lower prices, signaling there is solid retailer demand under the market. Technically, live cattle futures are showing signs of potential bottoming action on the daily charts, though that could end up just being a pause before the next leg down if support at the early September lows is violated.

Hogs: Lean hog futures posted strong gains the final two days last week after Germany confirmed a case of African swine fever. Pork exports from Germany to non-EU countries have essentially halted, prompting expectations Chinese demand for U.S. pork will improve. As a result, we expect a firmer tone in lean hog futures to start the week. But futures must push above last Friday’s highs and find fresh buyer interest or they are at risk of profit-taking. Friday’s upside gaps on the daily charts are key support levels bulls must defend on a corrective pullback. In addition to expectations of stronger export demand, the cash hog market is rising. The average direct cash price firmed $1.72 on Friday, though fall- and winter-month futures already hold contra-seasonal premiums to the cash index.