Ahead of the Open: Better U.S. Weather Weighs on Grains, Soy as Traders Wait for China Talks This Weekend

Posted on 06/26/2019 8:09 AM

GRAIN CALLS:

Corn: Down 3 to 4 cents
Soybeans: Down 2 to 4 cents
Wheat: Steady to down 3 cents

General Comment: Corn, soybeans and wheat seen adding to losses sustained Tuesday with prices weighed down by forecasts of dry weather in parts of the U.S. Midwest and Plains, lifting hopes of an improved crop conditions and wheat harvest progress. Yesterday was the 17th straight day of below-normal temperatures on U.S. corn production, but it ends today. Less than 5% of U.S. corn, soybean, HRW wheat, SRW wheat were drier than normal during last 30, 60, 90, and 180 days. Warmer temperatures along with less frequent and lighter rain will occur across the Midwest during the next two weeks. But enough rain should fall to prevent significant drying that would create new problems for this year’s delayed development.  Excessive heat is not expected through at least the next ten days and high humidity will keep nighttime temperatures above normal. The Delta and the Southeast will see a good mix of rain and sunshine during the next two weeks. 

Traders may also be evening up before Friday’s USDA June 1 stocks and acreage reports. Buying interest also likely restrained by increase market volatility tied to both increase tensions between the U.S. and Iran and low hopes for a China trade deal. 

The U.S. is willing to suspend the next round of tariffs on an additional $300 billion of Chinese imports as both sides prepare to resume trade negotiations, according to Bloomberg, citing people familiar with the plan. Latest calculations from Bloomberg show the cost from an escalating trade war could hit $1.2 trillion by the end of 2021.  President Donald Trump s says China knows wheat the U.S. has to have for a trade deal. Trump tells Fox Business Network that he would do additional tariffs if there is no trade deal, but a deal could be reached this weekend at the G20 meetings in Japan to avoid the need for further tariffs.  Meanwhile, Treasury Secretary Steven Mnuchin, speaking on CNBC this morning, tried to sound upbeat on the prospects for a deal, saying that 90% of an agreement was already in place.   The United States "is not looking for victory" with China over trade but wants "a sensible deal that addresses the legitimate issues that we have," U.S. Commerce Secretary Wilbur Ross said on Wednesday. “There are some inappropriate activities underway by the Chinese. They must cease. If they do, if we make some redressing of the trade imbalance, then that's a reasonable deal for both parties,” Ross told Fox Business Network in an interview earlier today.  

Canadian farmers reported seeding less land to canola and wheat in 2019 than a year earlier according to a Statistics Canada survey released on Wednesday morning. All wheat planted acres may fall to 24.6 million acres, down from 25.67 million last year and below trade estimates for 25.7 million. Canola acreage estimated at 21 million, down from 31.3 million last year but above estimates for 20.7 milion. The survey conducted between May 14 and June 11 showed farmers increased area for barley and oats, likely due to higher prices, resulting from low global stocks and higher anticipated need for live stock feed.  

USDA daily export reporting service reported private exporters sold 145,000 metric tons (MT) of soybeans to unknow destinations for delivery in the 2018-19 marketing year.

Corn:  Futures are down about 3 cents overnight and challenging Monday’s session lows. Last week’s low at $4.49 remains key support and chart traders would like to see December futures close above $4.54 on Friday. China's agriculture ministry said on Wednesday it has now found fall armyworm in 19 provinces, across about 333,000 hectares of crops. The prevention and control of the pest remains "grim", the ministry added. Beijing has previously said the pest, which can infest and damage hundreds of hectares of crops overnight, is a severe threat to China's food security. Monday’s USDA inspections report showed China shipped 58,625 metric ton (MT) from the Gulf last week, an unexpected sign of import demand for U.S. corn. China imported 2.392 million MT in the January to May period, up 41.4% from the same period a year a ago.


Soybeans: November futures fell to $9.20 ¼, the lowest since June 14 overnight and is trading just below the 200-day moving average at $9.24 ¼ this morning.  Last week’s low at $9.22 ¾ is key closing support this week with resistance at $9.48.  

Wheat: The wheat markets are in retreat after failing to rise above last week high yesterday.  European wheat futures fell from a three-week high on Wednesday, as dealers awaited clearer indications on crop stress from heatwaves in Europe and the Black Sea region. Traders are monitoring the heatwave in western Europe with crop risk slightly only slightly in France and Germany.

LIVESTOCK CALLS:

Cattle: Steady to mixed
Hogs: Steady

Cattle: Live cattle will be supported by another drop in market weights. Dressed weight last week fell to 791 lbs., down 1 lb. from a week earlier and 14 lbs. below a year earlier. Wholesale beef prices eased again Tuesday, but sales were active. Choice beef fell 10 cents and Select dropped 86 cents.

Hogs: Futures seen steady and may try to build on Tuesday’s corrective rally ahead of USDA Quarterly Hogs and Pigs report on Thursday after the close. Analysts surveyed by Reuters expect the report to show all hogs and pigs as of June up 3.0% on average from year-ago levels, but we fear that figure could come in even higher based on recent slaughter numbers. China has announced today that all Canadian meat exports have been banned - this is on the back of Chinese custom inspectors detecting on Tuesday this week residue in pork products from a restricted feed additive called ractopamine and the potentially serious accusations of forged export certificates on Canadian pork exports into China. The Chinese Embassy in Canada said that an investigation of Canadian health certificates attached to a batch of pork exported to China were found to be counterfeit and the number of forged certificates was up to 188 in total - citing this as a criminal offense.

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