Ahead of the Open: Consolidating Ahead of the Weekend and July Option Expiration

Posted on 06/21/2019 7:58 AM

GRAIN CALLS:

Corn: Down 1 to 2 cents
Soybeans: Down 4 to 6 cents
Wheat: Steady to down 2 cents

General Comment: Grain and soybean markets have retreated from session highs overnight and look to begin this morning under light pressure despite more heavy rain expected through the weekend before a slightly drier and warm period unfolds starting June 25.  Adding to the market volatility today will be the expiration of the July options. Tonight’s closes are important for confirming the reversals to the upside on Thursday. Thursday’s lows in corn, soybeans and wheat now represent key short-term support and may also hold long-term implications. Traders are hesitant to take on new long positions ahead of the weekend and possible weather shift. Add in the additional uncertainty about what USDA may say in its June 28 Acreage and Quarterly Grain Stocks Reports and choppy trading is expected today. 

After global central banks moved to promised more monetary easing to revive global growth this week, sending stock markets higher and interest rates lower, the markets are more on edge today amid increased tensions with Iran. President Trump ordered military strikes against Iran and then abruptly called them off at the last minute. The operation was in its initial stages, with ships in position and planes in the air, when the order came to stand down, the New York Times reported. It's not clear why the President changed his mind or whether the attacks may still happen. Tensions with Iran escalated after the Iranians shot down a U.S. drone earlier this week. 

Federal Reserve Chairman Jerome Powell this week highlighted slow global growth and uncertainty surrounding trade policy in explaining a monetary-policy pivot that exceeded analysts’ expectations for its dovishness. Rate cuts may not help support stronger growth in the U.S. economy, but it did lead to the biggest two-day drop in the dollar against a basket of currency since February 2018 on Wednesday and Thursday. A weaker currency has been seen as good for a nation because it incentivizes domestic production over imports and may, at the margin, help exporters. More importantly, a depreciating greenback should boost credit overseas.  That’s because local borrowers’ balance sheets become stronger when their currencies appreciate, resulting in lower credit risk and expand bank lending capacity—long-term positive developments for growth. 

USDA daily export reporting service reported no new large sales in the past 24 hours. 

Corn: Prices heading for a lower weekly close after nearby futures rose to the highest in five years earlier this week. Not much fresh news this morning to bring in new buying, encouraging some profit taking selling. The National Corn Growers 

Soybeans: Soybeans are higher for the week as planting worries shifted to soybeans this week from corn. Today is the longest day of the day and beans not yet planted or emerge will struggle to reach full yield potential.

Wheat: The approaching U.S. harvest keep pressure on the winter wheat futures with some warmer, drier weather likely to aid collection activities. FranceAgriMer in its weekly update maintained its 80% good to excellent condition rating for the French soft wheat crop the week ending June 17. This is five points higher than year-ago and Europe will be a more aggressive exporter after drought last year curbed shipments.

LIVESTOCK CALLS:

Cattle:  Lower
Hogs: Lower

Cattle: Live cattle futures seen lower on technical selling and weak cash markets. Cash cattle trade picked up in Iowa between $112 and $114 yesterday, with Kansas, Nebraska and Texas seeing active trade down to the $109 to $110 area. Prices are down from an average of $113.62 last week.  Wholesale beef prices fell Thursday, with Choice down 87 cents and Select down 76 cents. Sales were slow. Today, traders will shift gears to preparing for USDA’s Cattle on Feed Report that will likely show an uptick versus year-ago in the total number of cattle on feed and a decline in placements amid the jump in feed costs.

Hogs: Futures seen defensive on weakening charts and lower cash markets.  Cash hog prices tumbled $1.52 on Thursday, dashing hopes a cash market was building a base of support. Wholesale pork cutout values dropped 25 cents yesterday as declines in picnics, bellies and hams offset small gains in loins, butts and ribs. Slaughter is running more than 9% above a year ago this week, a fourth straight week of excessively large runs and increasing speculation that U.S. producer dramatically expanded herds last fall on speculation African swine fever outbreaks in China would result in massive exports this year. USDA’s Cold Storage Report will provide another read on demand after the close today.

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