Ahead of the Open: Grains May Drift Higher on Warmer Forecasts, Positive Charts

Posted on 07/12/2019 7:55 AM

GRAIN CALLS:

Corn: Steady to up 2 cents
Soybeans: Mixed to up 1 cent
Wheat: Steady to down 2 cents

General Comment: Corn, wheat and soybeans paused overnight after rising after the USDA supply and demand report on Thursday showed smaller but still plentiful world supplies of corn, soybeans and wheat. USDA will resurvey 14 states to update U.S. acreage ahead of the August Crop Production Report. The trade is ready to move on from the report since the U.S. crop yields and acreage forecasts remain highly uncertain and it is looking warmer and drier into late July. Today’s is the last trading day for July futures. 

The U.S. Midwest weather forecast had no major changes as some remnants of the ongoing tropical storm in the Gulf by the middle of next week and some hit and miss activity across the far northern Midwest, rainfall still looks to be limited over the next 10 days. Temperatures will rise to above average, moving solidly into mid 90-degree Fahrenheit range.  The heat wave affects the central U.S. over the next 10 days as upper-level high pressure bounces within the central U.S., increasing the chance for July to be the warmest since 2012 in the Corn Belt.  A cool front breaks some of the heat around July 22-24, but it’s unlikely to mark a sustained pattern change toward coolness. Heavy rain from Tropical Storm Barry floods parts of the Delta, but only some rain is expected from its remnant next week in the southeast Corn Belt. Damage from flooding will be more extensive than damage from winds across Louisiana and Mississippi.

President Trump took to Twitter yesterday to complain that China hasn't boosted purchases of U.S. farm products, a promise he said he secured from President Xi at the G20 summit in June. Beijing has never confirmed the pledge, and neither side has documented the discussion. Reports that the U.S. is working on a list of commodities for China to purchase is tentative at best. The United States is in a "quiet period" with China over trade negotiations, White House adviser Peter Navarro said in an interview on CNBC on Friday, adding that in-person talks would start soon in China. U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Beijing "in the very near future," Navarro said.  

USDA daily export reporting service said Private exporters sold 104,100 metric tons of corn for delivery to Panama during the 2019-20 marketing year.

Corn: Prices may drift today as traders wait for update weather forecasts next week. Central Illinois average cash price rose to $4.48 yesterday, the highest since June 2014, USDA data show. That’s a positive signal.

Soybeans:  Futures slipped lower overnight but are back near unchanged heading into the U.S. session. USDA cut U.S. production as expected in yesterday’s report but also projected stronger export competition for U.S. supplies. A high range weekly close would be a positive technical signal today. Chinese soybean imports drop 25% year-over-year. China imported 6.51 MMT of soybeans during June, an 11.5% decline from its May purchases of 7.36 MMT and a 25.2% slide versus last year. It was the lowest for the month since 2014, according to customs data released today. Last year’s purchases were pushed higher by anticipation of high tariffs on U.S. soybean shipments. For the first six months of the calendar year, China has imported 38.27 MMT of soybeans, a 14.7% slide from last year at this point on reduced hog feed demand.

Wheat: Wheat futures edged lower overnight but found some underlying buying interest after reaching a near two-week high yesterday and heading for its first weekly gain in a month following USDA forecasts for lower global production. The condition of French soft wheat declined further in the week to July 8, with 73% of crops rated good or excellent against 75% the previous week, farm office FranceAgriMer said. The score remained above the year-earlier level of 72%. Soft wheat harvesting in France was well underway, with 9% of the crop area harvested by July 8 against 1% a week earlier

LIVESTOCK CALLS:

Cattle: Mixed to firmer
Hogs: Steady to weak

Cattle: Cash cattle trade got started in the Iowa/Minnesota market between $112.50 and $115 yesterday, which was steady to higher compared to last week’s action between $112 and $114. But all was quiet on the cash front in other locations. However, fresh beef prices slipped lower on Thursday with Choice down 65 cents and Select falling 10 cents. Sales were moderate.

Hogs: Sluggish export sales in the week ended July 4 put new pressure on futures yesterday. However, packer bids for cash hogs is improving this week, including another 28-cent gain in the national average price yesterday. The wholesale pork cutout value gained 57 cents on Thursday on light sales. The recent counter-seasonal drop in pork prices should stimulate both improved domestic and export demand. Bulgaria reported new cases of African swine fever (ASF) in a dead wild boar as well as a dead pig near the Romanian border. Romania reported six new cases earlier this week. Meanwhile, criminal gangs in China are faking outbreaks of African swine fever on farms free of the disease and forcing farmers to sell their healthy pigs at sharply lower prices, the agriculture ministry said on Friday.

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