Ahead of the Open: Quiet Session Waiting for U.S. Harvest Results

Posted on 09/18/2019 7:47 AM

Grain Calls

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

General Comment: Corn and soybean futures mixed today, leveling off after Tuesday’s retreat did not damage the charts as attention shifted away from turbulent crude oil markets and towards yield results for the U.S. harvest now getting under way. Early results are highly variable, failing to provide a strong trend on the direction of final production this year.

The markets are awaiting further developments in U.S.-China trade negotiations following renewed purchases of U.S. beans by China in recent days. Wheat may be slightly firmer, supported by a run of tenders by importing countries. 

U.S. weather looks like average to slightly above-average temperatures the next two weeks with heavy rain in spots that may cause flooding in isolated locations. Rains in from Texas to Kanas by the weekend will be welcome ahead of planting winter wheat.

Brazil has few changes to the two-week outlook with most of the shower activity of significance occurring in the south leaving most areas in need of greater rain to improve conditions. Argentina has a restricted rainfall pattern remaining in place through at least the next ten days and greater rain is needed in many areas to improve conditions; wheat in western Argentina remains in need of rain to improve conditions for development. 

China's trade and economic officials arrive in Washington today for meetings with their U.S. counterparts on Thursday or Friday. China continues to push an initial deal focused on agriculture and other less contentious matters, but U.S. officials want an overall comprehensive, enforceable accord. Meanwhile, the size and range of U.S. agricultural goods to be purchased by Beijing is far from clear, with expectations a prior list could be expanded. The Trump administration might consider removing new tariffs if there is an agreement on intellectual property, an issue most see as a high hurdle to accomplish in the new few weeks.

World Bank President David Malpass said the global economy is poised to decelerate more than previously estimated. The Federal Reserve is widely expected to reduce interest rates by a quarter percentage point for a second straight meeting amid slowing global growth on the heels of President Donald Trump’s trade war. Chairman Jerome Powell’s post-decision press conference this afternoon will offer clues into the Fed’s thinking. The decision will set the stage for policy announcements from Bank of Japan, Bank Indonesia and Bank of England due Thursday. Blaming a weakening global economy, FedEx sharply slashed its profit outlook in the latest sign that trade tensions are dragging down big American companies.

The U.S. secretary of state’s trip to Saudi Arabia today could result in the release of an American report on the attacks against oil facilities in the kingdom last weekend. American investigators have been studying satellite imagery and analyzing missile and drone parts to bolster the U.S. claim that Iran was responsible. One theory is that missiles were launched from Iran but programmed to fly through Iraqi airspace. Oil prices are slightly lower after Saudi Arabia said it would quickly restore full production after the attacks.

USDA’s daily export sales reporting service announced no new large sales by private exporters. That could be a little disappointing to those betting on additional sales after USDA announced a total of 720,00 metric tons of soybean sales to China the past thee trading sessions.

Corn: Futures are back near Tuesday’s lows and the 20-day moving average, erasing last night’s small rebound. A higher close tonight would be a positive signal. While China won the battle against an armyworm epidemic that threatened the country's corn and grain production, JC Intelligence crop tour is looking for dry weather to trim both corn and soybean production this year.

Soybeans: Soybeans are leanings slightly lower after failing to hold last night’s small rebound. The market is consolidating last week’s strong gains tied to smaller U.S. production prospects and small Chinese purchases of U.S. soybeans.  

Wheat: Futures slightly higher on improving world demand for wheat, although U.S. is unlikely to garner much of this week’s buying. The wheat market is watching for tender results from Egypt, Turkey, Tunisia and Algeria with Jordan and Ethiopia announced upcoming tenders.  Morocco’s wheat import tariffs for are set to fall from 135% to 35% on October 1. Ukraine traders asked the government to increase the volume of wheat allowed for exports in the 2019-20 July-June season to 20 million metric tons (MMT) from the 19 MMT proposed by the government. The government and traders sign an export memorandum each year to determine how much wheat is expected to be exported.

Livestock Calls

Cattle: Steady to firm
Hogs: Steady to weak

Cattle: Cattle seen opening steady to firm with carryover buying from Tuesday’s stronger close and a few firmer cash bids yesterday. However, rallies may stall with lower beef prices. While Choice fell 85 cents on Tuesday and Select dropped $2.66, sales were active. Slaughter the first two days of this week was up 4,000 head from a week earlier and 3,000 head higher than a year ago. The key will be continued strong processing to finish the week rather than a slowdown like we saw last week.  Cattle on feed September slipped 0.6% from a year ago, according to the average estimate of analysis polled by Reuters. Placements in August probably fell 5.5% from a year ago after cash cattle prices tumbled, the poll results showed. 

Hogs: Look for a weak opening after sharp losses Tuesday as slaughter remains elevated. Hog futures sentiment continues to make large swings with funds rushing into and back out depending on chart signals. Cash hogs were narrowly mixed with the National average price down a penny on Tuesday. Pork cutout values fell 45 cents, but sales rose to the highest in nearly six months, a possible sign of stepped up exports. South Korea confirmed its second case of African swine fever at a pig farm near the country's border with North Korea, a day after the country's first outbreak of the deadly virus, its agriculture ministry said on Wednesday. The disease has now spread to much of Asia, excluding Japan. China's government is releasing pork from stockpiles to help cool surging prices ahead of Oct. 1 celebrations of the Communist Party's 70th anniversary in power. However, the 10,000 metric tons of sales is less than 0.2% of monthly consumption, a sign the government is trying to slow the record price run than to change supply levels. 

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