Ahead of the Bell: Grains, Soybeans Firm on Weather, China Buying Speculation Ahead of the Holiday

Posted on 07/03/2019 7:41 AM

GRAIN CALLS:

Corn: Up 3 to 5 cents
Soybeans: Up 3 to 5 cents
Wheat: Up 1 to 5 cents

General Comment: Corn and soybeans seen firming heading into the holiday on weather concerns and avague Bloomberg report that China may boost purchases of U.S. commodities during the current trade truce. Trading volume will likely be thin today as traders hit the exits for the July Fourth holiday. Grain markets close at 12:05 p.m. CDT today and won’t reopen until 8:30 a.m. on Friday.  

Temperatures will fluctuate over the next two weeks as cool and hot air battle for position, ultimately leaving most areas seasonable through mid-July.  Scattered thunderstorms form on each of the next 14 days, and especially over the next week from the Dakotas through the Corn Belt, after which rains will be less frequent in the cooler period within July 10-14 period.
Since 1986, the “good” to “excellent” crop ratings this week for corn and soy were only lower in 1988, 1991, 1992, 2012.  Only 92% of soybeans were planted Jun. 30, the least planted since data began in 1986.  World Weather Inc. said in a report yesterday at statistical evidence is building against an extended growing season this year. Late-planted crops may have a ``very difficult time finishing out normally,’’ the forecasts said.   

China will engage in some goodwill buying of U.S. soybeans, corn and pork as trade talks between Beijing and Washington resume, according to unnamed sources cited by Bloomberg. While total volume will depend on how talks proceed, amounts will probably be smaller than the 20 million metric tons (MMT) China committed to during the last trade war truce. Those sources say the plan has not been discussed with their American counterparts and are not part of the current truce agreement.  
Traders remain skeptical of the report until actual purchases are realized. Besides which commodities will be on the list, other unknowns include the quantities and timeframe for such purchases, and whether or not China has flexibility regarding any purchase commitments. Some of any confirmed Chinese purchase commitments will likely be targeted to refill the country's strategic reserves.

Meanwhile, several major U.S.-based technology companies are planning to shift substantial production out of China, spurred by a bitter trade war between Washington and Beijing, the Nikkei reported, citing sources. HP and Dell Technologies are planning to reallocate up to 30% of their notebook production out of China, according to the Nikkei. Microsoft, Alphabet, Amazon.com, Sony and Nintendo are also looking at moving some of their game console and smart speaker manufacturing out of the country, the Nikkei added. Senior U.S. official told the Commerce Department's enforcement staff this week that China's Huawei should still be treated as blacklisted, days after U.S. President Donald Trump sowed confusion with a vow to ease a ban on sales to the firm.

The global government bond rally continues this morning.  The yield on 10-year Treasuries dropped to the lowest level in more than two years, hitting 1.955%, while Germany’s 10-year yield is trading near a NEGATIVE 0.4%.  Analysts don’t see an end to the global rally anytime soon after the selection of IMF chief Christine Lagarde as the next head of the European Central Bank. She would be the second French head of the bank, the first woman, and more of a politician than a monetary policy expert. In the U.S., President Donald Trump picked Christopher Waller and Judy Shelton as his nominees for the Federal Reserve board, with both seen as supporting easier policy.

USDA daily export reporting service did not report any new large sales this morning.

Corn: Corn futures seen rising for a second session after holding key gap support left on the charts from May 28 earlier yesterday.


Soybeans: November beans are back above $9 this morning after early touching $8.96, the lowest since June 12 overnight. Prices are about 7 cents below the 100-day moving average that would likely trigger fresh buying interest.    

Wheat: The market is heading for the first gain in four sessions, following corn higher.  Rallies will be capped by stepped up U.S. harvesting and worries about slower demand for U.S. supplies. After Egypt’s tender and purchase of 60,000 MT of Romanian wheat yesterday, more North African nation tenders are surfacing. Both Tunisia’s and Algeria’s state buying agency announced tenders today for milling wheat with European or Black Sea supplies expected to fill the orders.

LIVESTOCK CALLS:

Cattle: Mixed
Hogs: Steady to firm

Cattle: Live cattle still waiting for the cash trade to develop this week with an early softer Packer bids finding few sellers. Meanwhile, wholesale beef prices rose Tuesday with Choice rising 75 cents and Select gaining 35 cents on moderately active sales. It looks like beef prices are finding an early seasonal low as supplies are set to tighten the next few months and marketings are already very current as evidence by the low slaughter weights, down about 13 pounds from a year ago last week from year earlier.   

Hogs: Futures seen trying to build on this week’s rally. There were no cash market prices posted Tuesday because of packer submission problems. Slaughter the first two days of tis week is up 5,000 head from a year ago, a more manageable supply. The pork cutout value did fall 7 cents Tuesday amid strong movement of 403 loads. USDA export sales reports will be released on Friday morning. China has shown shortcomings in some aspects of preventing African swine fever, and the situation remains complicated and severe, the country's cabinet said on Wednesday. The management of transporting live hogs is not strict enough, while there is insufficient capacity in testing for African swine fever virus in hog slaughtering, processing, and circulating procedures, China's State Council said in guidelines on prevention and control of the pig disease

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