Ahead of the Open: Chart Buying, Adverse Weather Support Grains, Soybeans

Posted on 06/13/2019 8:02 AM

Grain Calls 

Corn: Up 5 to 8 cents
Soybeans: Up 4 to 6 cents
Wheat: Steady to up 3 cents

General Comment:  Bullish charts and adverse weather seen boosting prices today. Corn futures rose above the May 29 swing high at $4.38, while soybeans gained for a fourth consecutive session as forecasts of more rains and cool temperatures the next 10 days in the U.S. Midwest threatened to halt planting and curbs early crop development. Some flooding will also develop.  Wheat jumped to its highest since early February with prices underpinned by too much rain for maturing U.S. winter wheat and dry weather hurting recently planted crop in Australia, typically the world's fourth-largest exporter. While shrinking supply remains the dominate grain market focus, the rising trade tensions will slow rallies.

U.S. President Donald Trump on Wednesday said he had a feeling that a U.S.-China trade deal could be reached and again threatened to increase tariffs on Chinese goods if they do not make a deal. Speaking to reporters at the White House, Trump also said he has no deadline for a deal and reiterated his intention to meet with Chinese President Xi Jinping but gave no further details. China's commerce ministry said today Beijing will not make concessions on matters of principle to make a trade deal with the U.S. Chinese regulators should step up support for the economy and keep ample liquidity in the financial system, Vice Premier Liu He said on Thursday, suggesting Beijing would soon unveil more policies to bolster growth amid rising U.S. trade pressure

In a further expansion of global trade tensions, Trump upped his criticism of Germany on Wednesday. He threatened sanctions over Angela Merkel’s continued support for a gas pipeline from Russia and warned that he could shift troops away from America’s NATO ally over its defense spending. Euro zone industrial production fell 0.5% in April, the second straight monthly drop and further evidence of slowing world growth. 

Oil prices jumped as much as 4% on Thursday after a suspected attack on two tankers in the Gulf of Oman near Iran and the Strait of Hormuz, through which a fifth of global oil consumption passes. The attacks supported trader buying of safe-haven assets likes government bonds and gold.

Today’s USDA weekly export sales report was a disappointment for market bulls. Wheat sales for delivery in 2019-20 were 47,600 metric tons (MT) amid higher sales reductions. That was below the 250,000 to 500,000 MT expected. Corn sales were 168,500 MT, while up from a net sales reduction a week earlier it was below trade estimates for 250,000 to 550,000 MT. New-crop corn sales totaled just 94,100 MT.  Soybean sold for export last fell 50% from a week earlier to 255,900 MT and down 44% from the four-week average. China switch some soybean from unknown destinations. New-crop sales were 275,200 MT.  

USDA daily export sales reporting service said private exporters sold 175,000 MT of corn to Mexico for delivery in the 2019-20 marketing year this morning.

Corn: Futures are up against key technical barriers. A close out above the May highs would be a new buy signal that could generate a rush of new fund buying. It should be an interesting session to see if new buying can push prices above overnight highs.

Soybeans:  Soybeans are poised to add to this week’s rally but remain below resistance at last week’s highs. Chinese soybean buyers are asking U.S. exporters to delay cargoes due to be shipped in July until August, two sources familiar with the matter told Reuters, raising fears of cancellations like ones that roiled the market last year.  Soybean imports from the United States virtually dried up in the second half of 2018, before Beijing agreed to buy nearly 14MMT from American farmers over December to March during a temporary truce in the trade spat. More than 6 MMT have already been shipped to China, but some 7 MMT bought before talks broke down in May still need to be delivered.

Wheat: SRW futures  seen following the lead of the corn market. Welcome rain in north and east Germany overnight, good for wheat after last summer’s drought, Dry and warm conditions also developing in parts of Ukraine and Russia and eastern Europe. Dry weather will persist across Australia until at least the end of September, the country's weather bureau said on Thursday, in a forecast that threatens to further lower wheat production in the world's No. 4 exporter.

Livestock Calls:

Cattle:  Steady-weak

Hogs: Steady-weak

Cattle: Live cattle seen weaker, extending Wednesdays losses on rising supplies and uncertainty about demand. Slaughter this week is up 14,000 head from a year ago and 4,000 head higher than last week, USDA data show. Beef prices were lower with Choice falling 24 cents and Select dropping $1.52 yesterday. Sales improved and more will be needed to keep from building inventories. Cash cattle have been lightly tested this week with prices a little softer and defying expectations for a firmer trend developing this week. USDA weekly export sales report showed net sales of 16,400 MT last week, down 18% from the prior four-week average. Shipments rose 8% above the four-week average.  

Hogs: Futures seen opening steady to lower after prices closed slightly weaker Wednesday, but still erasing larger losses earlier in the session. The national average cash hog price was up 83 cents, led by a $1.28 gain in average Iowa/Minnesota bids. However, wholesale pork cutout values fall $1.25 with most cuts sliding lower yesterday. Sales were light to moderate, slowing from earlier this week. Slaughter is up 83,000 head from a year ago. The average weight for hogs in Iowa and Minnesota, was 285.2 pounds in the week ending June 8, up 2.3% from last year, adding to total tonnage packers need to sell. U.S. exporters sold 23,100 MT of pork last week, down 36% from the prior four-week average with Australia and Mexico the top buyers and Chinese purchases sliding to just 2,400 MT last week.  Pork shipments rose 13% from a week earlier and were 8% above the four-week average with Mexico taking 7,600 MT, and China shipping 5,200 MT.  Export date is likely to weigh on prices today.

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