Ahead of the Open: Wet Midwest Forecasts Driving Funds to Exit Long-Held Bearish Bets.

Posted on 05/16/2019 7:54 AM

Grain Calls

Corn: Up 4 to 6 cents
Soybeans: Up 4 to 6 cents
Wheat: Up 6 to 9 cents

 

General Comment: The grain and soybean are seen trading with a firm undertone amid the wet forecasts for the next two weeks that will further delay planting and may increase yield and quality risks for winter wheat production. The charts are turning positive with a strong close on Friday probably needed to accelerate fund buying back of near record net-short positions.

The window of warmer, drier weather for some areas of the Corn Belt will be short-lived as several major and minor storms will cross much of the central U.S. the next two week, bringing an additional 3 to 5 inches of rain to at least two-thirds of the corn and soybean production belt. The southeast third of the area will also receive some storms, just not as heavy.

World stock markets are firmer and crude oil is stronger while the dollar is holding about steady and just below key resistance. The markets have cast aside for now the White House threat yesterday to blacklist the Chinese telecom company Huawei Technologies from buying components from American suppliers. The move could cripple China's largest technology company just as it's set to build 5G wireless networks that will form the backbone of the modern economy. The threat is likely to elevate fears in Beijing that Trump’s strategic goal is to contain China, sparking a possible cold war between the world’s biggest economies. Some analysts suggest Trump just wants to pressure China over trade demands as talks hang by a thread. But several American lawmakers may also see this moment as the last chance to prevent China from eclipsing the U.S.

 

The daily USDA export report for large sales did not report any new business this morning.

 

Corn futures remain contained inside of Thursday’s range when prices rose to the highest in seven weeks but close more than a dime off those highs. Volatility is just beginning to ramp up with the growing weather risks for U.S. production and the increased uncertainty about the outcome of the U.S/China trade talks. Taiwan purchased 65,000 MT of corn to be sourced from the U.S. or Brazil. Exporters sold 553,300 metric tons (MT) of old-crop corn in the week ended May 9 and 80,800 for new crop, USDA reported this morning. Old-crop sales were at the top of trade estimates, but new-crop fell below trade expectations.

 

Soybeans futures rose overnight and remain just below initial resistance at the 20-day moving average and the downside gap left on the weekly charts last week.  The market has time to react to the weather as the main concern is getting corn planted as soon as possible. U.S. and world inventories of soybeans remains burdensome and limits immediate concerns about the current planting delays. Brazil’s soybean shipments to China stood at 20.07 MMT through the first four months of 2019, down 13% from the same period last year, according to a report from Cargonave shipping agency. It says Brazil’s soybean exports to all destinations are down 7.2% from last year at 27.6 MMT through the first third of this year. This morning’s export sales report showed 370,900 MT of old-crop sales and 303,400 for new-crop last week, mostly inline with trade expectations.

 

Wheat futures seen moving higher today as too much rain is becoming a concern for HRW wheat that up to this point has enjoyed a good growing season. SRW wheat conditions have been declining all year from too much rain and cold temperatures. Driest topsoil conditions for planting in the U.S. are focused on North Dakota, Montana and northwest Minnesota, including about 85% of the U.S. spring wheat acreage. Weekly USDA export sales for last week showed net sales of 114,500 for old-crop and 419,400 for new crop. Both were up slightly from a week earlier and should lend some underlying support.

 

Livestock Calls:

 

Cattle:  Steady to lower

Hogs: Steady to lower

Cattle futures seen steady to weak after giving back much of the early-session gains on Wednesday amid reports of sharply lower cash prices. However, trade has been light and suggest feedyards are passing. Boxed beef marked lower again yesterday with Choice down 55 cents and Select down 93 cents. Sales were moderate to good. Another big slaughter week is planned and that means domestic and overseas demand remains strong.  Beef export sales last week fell 22% below the prior 4-week average while shipments were up 16% from the average, USDA reported this morning.

Hog futures seen steady to lower. Cash hogs were mixed yesterday with the national average price falling 22 cents while bids in Iowa/Minnesota gaining 54 cents.  Wholesale pork cutout values ended down $1.83 on Wednesday as sales continued to be moderate to slow. Slaughter so far this week is down 34,000 head from a week ago as packer margins are near breakeven. Pork sales last week fell more than 50 % from the prior 4-week average while shipments were down 7%, USDA data this morning showed.

 

 

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