Ahead of the Open: Beans Drop on Latest U.S. Tariff Plan; Wheat Up on Shrinking Global Crop

Posted on 09/18/2018 7:44 AM

Grain Calls 

Corn:  Steady to down 1 cent

Soybeans: Down 2-4 cents

Wheat: up 4 to 7 cents

General Comment: The White House announced a new 10% tax on over 5,000 products from China that will come into effect Sept. 24 with those tariffs rising to 25% on Jan. 1. The move probably eliminates the prospect of further trade talks with Beijing anytime soon. The White House also said there would be a third phase of duties targeting a further $267 billion of goods should China take retaliatory action.  China’s Ministry of Commerce quickly announced it would retaliate, but it didn’t provide further details. Beijing had previously said it would impose duties on $60 billion of U.S. goods should Washington escalate the trade dispute. Still, the Commerce Ministry appeared to leave the door open for more negotiations. It simply said the new tariffs bring uncertainty, stopping short of calling off talks altogether – something that analysts widely expected. Global markets calmly absorbing announcement.

U.S. food companies kept slaughter plants shut on Monday in southeastern states swamped by Hurricane Florence as catastrophic flooding killed nearly 2 million chickens, collapsed the walls of at least two hog manure pits, and made stretches of major roads impassable. Florence, which has dumped up to 36 inches of rain on North Carolina since Thursday, was interrupting supply lines around the state and into neighboring South Carolina and the worst is yet to come as rivers rise.

Corn futures are likely to open steady to lower amid advancing U.S. harvest. Rain will curb collection in northern parts of the Midwest this week and may continued next week. Overall, mixed progress expected this week after USDA said Monday that 9% of the harvest was completed as of Sunday. Rain is developing across parts Argentina and seasonal increase in rain for Brazil is starting about three weeks early in the central and norther areas. Demand remains strong with exports likely to continue to improve with few cheaper feed wheat or barley substitutes available in the global market.

Soybeans market seen opening on the defensive after falling to a 10-year low overnight. Heightened China trade tensions and the USDA forecast for a record U.S. crop have curbed buying interest. The government said U.S. harvest was 6% completed on Sunday, above the 3% average for the date. The window for U.S. exports is narrow with rain boosting soil moisture ahead of the South America planting season. Progress on U.S. trade talks with Canada, EU and Japan is needed ahead of the November elections but the key is China. NOPA reported the crush rose 12% in August from a year ago and soybean oil inventories were smallest since December, a sign of improving use in biodiesel. Keep an eye of the meal market with it trading just above the late August lows. Holding above those lows would help to lend some underlying support to soybeans.

Wheat futures seen supported by adverse weather in Australia after cold weekend temperatures and continued dry outlook for another two weeks that may curb output in the fourth-largest exporting nation. Spring wheat harvesting in Russia continue to be delayed by snow and cold weather. Russian Ag Ministry cuts their grain export forecasts to 35 to 37 MMT from 44-45 MMT earlier. Egypt is tendering for an unspecified amount of wheat today for November shipment. Lowest offer was $225.95 a metric ton, that’s up from last week’s purchase price for 235,000 MT.

Livestock Calls

Cattle: Steady to firmer

Hogs: Steady to firmer

Cattle seen opening steady to firm as Choice beef cutouts rose $1.77 and Select gained 91 cents However, sales were light just 89 loads as slaughter rose to 119,000 head, up from 111,000 a year ago. If market weights hold below a year ago, the larger kills should not become an oversupply problem.

Hogs seen steady to firm as wholesale pork prices continued to march higher on Monday, up $1.49 to the highest since July 27. The national average cash hog price rose $1.80 while western corn belt cash prices jumped $2.78.

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