Ahead of the Open: Mixed Grain Market Outlook in a Consolidation of Recent Price Moves

Posted on 08/14/2019 7:44 AM

GRAIN CALLS:

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

General Comment: Corn futures seen rebounding very slightly today on bargain-buying after dropping almost 10% in the last two sessions, the biggest two-day drop in six years. Heavy fund selling probably shifted their net positions to short from long as prices are back to where this year’s rally began. It is possible the heavy volume and drop in open interest may mark a selling exhaustion.

Soybean are pausing after yesterday touching the highest since July 31. Wheat prices are bouncing with corn amid some signs of light export demand.

The U.S. Midwest weather forecasts are signaling better rain during the next week with temperatures seen fluctuating between above- and below-normal levels. The rains may aid corn grain fill and soybean blooming, podding and filling pods with beans. Next week’s Pro Farmer crop tour will carry more market importance because it is the first wide-area boots on the ground tour that will get a first-hand look on yield potential with the late planted crops.  

S&P 500 futures pointed to a drop at the open, while the 10-year yield Treasury traded lower than the 2-year yield for the first time since 2007 and a historic recession predictor. A negative yield curve is not bullish for the U.S. economy and underscores why the U.S. and China are making moves to step back from the brink of an all-out trade war. President Donald Trump delayed the impositions of new tariffs on a wide variety of consumer products including toys and laptops until December. Chinese officials are sticking to their plans to visit Washington in September for meetings.

China's economy stumbled more sharply than expected in July, with industrial output growth cooling to a more than 17-year low, as the intensifying U.S. trade war took a heavier toll on businesses and consumers, government data showed. the latest data was evidence that demand faltered across the board last month, from industrial output and investment to retail sales. That followed weaker-than-expected bank lending and gloomy factory surveys in recent days, along with the return of producer price deflation, reinforcing expectations more policy support is needed soon. Retail sales growth is also pointing to increasing consumer caution, most evident in slumping auto sales but also in property-related spending on items such as home appliances and furniture.

The Argentine peso lost more than 18% of its value against the dollar in the first two trading sessions of the week after President Mauricio Macri, a favorite among investors, registered a worse-than-expected performance in Sunday's primary. Argentine assets had not recorded the kind of simultaneous fall seen on Monday since the South American country's 2001 economic crisis and debt default. Concerns are rising about Argentina's ability to meet its debt obligations. How farmers react to political events remains uncertain, but it seems they will probably hold back soybeans until after the country's election in October because it’s likely that the Argentine peso will continue to fall.

USDA daily export announcement service said private exporters reported no large new export sales in the past 24 hours.

Corn: December futures are in consolidation mode, and it will take a close above $3.93 to improve the chart picture.

Soybeans: The strong rally in soymeal on Tuesday was positive but came on lighter volume and that has soybeans retreating this morning. Spreaders are back buying soybean oil and selling meal as tightening world supplies of cooking oils. India's vegoil imports in July rose 26 percent to 1.4 million tons from a year ago, a trade body said

Wheat: Futures seen following corn higher, but prices are getting more competitive. Germany’s 2019 wheat crop will likely total 23.81 MMT, a 17.5% gain from last year and a 40,000-MT decline from its forecast last month, according to the country’s association of farm cooperatives. As the very public China-Canada canola spat drags on, buyers from the Asian nation have been quietly purchasing other Canadian farm products; Canada shipped 1.9 million metric tons of wheat to China in the crop year through June, up 92 per cent from a year earlier, Canadian Grain Commission data show.

LIVESTOCK CALLS:

Cattle: Lower
Hogs: St-firm

Cattle: Futures seen weaker after two sessions falling the maximum allowed at the CME. Limits will remain expanded to $4.50 in live cattle and $6.75 in feeder cattle after another day of sharp to limit losses Tuesday. The Tyson fire could backlog supplies and the timeline for plant reopening remains uncertain. Live cattle have dropped to multi-year lows and the October contract dropped under the $100.00 threshold on Tuesday. A drop in cash prices is likely this week, but there have been few clues regarding how dramatic that slide will be.  Beef prices are on fire with Choice jumping $7.74 on Tuesday and Select rising $2.79 on active new business.

Hogs:  Lean hog futures may stabilize and rebound today. The market could find some support from the $1.26 rise in average cash hog bids on Tuesday. The pork cutout value softened $1.06 yesterday, but movement surged to 403.29 loads. Given the dramatic losses in the cattle complex, lean hog futures have limited losses this week Yesterday’s positive news on the U.S./China trade front helped to limit pressure, but the market is not holding its breath regarding more promises of big Chinese ag purchases until they show up in the weekly export sales report.

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