Ahead of the Open: Corn Higher on Corrective Buying, Soybeans May Be Lifted by China Talks

Posted on 09/05/2019 8:14 AM

Grain Calls

Corn: 1 to 2 cents higher
Soybeans: Steady to 1 cent higher
Wheat: 3 to 5 cents higher

 

General Comment: China and the U.S. will hold in-person trade talks in Washington in early October. The decision was agreed to during a call between U.S. Trade Representative Robert Lighthizer, Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He. People’s Bank of China Governor Yi Gang also participated in the call. Both sides will “take practical actions to create good conditions for consultations,” according to a Chinese government statement. Global stock markets had a positive response to the news, but the soybean market had a muted reaction, signaling soybean traders don’t believe a deal will be reached anytime soon.

 

Hurricane Dorian is moving north along the Southeast Atlantic Coast and is expected to turn north-northeast today. The forecast track is expected to take the center of Dorian close to the coast of South Carolina through the day, and then move near or over the coast of North Carolina tonight and Friday.

 

Corn: Futures were 1 to 2 cents higher overnight amid corrective buying. But as yesterday proved, sustaining buyer interest through daytime trade isn’t easy in the current bearish environment. We expect corn futures to open higher this morning, but it wouldn’t surprise us if the market takes another shot at the downside at some point. Supportive news is lacking and the path of least resistance remains down, giving traders no incentive to actively cover short positions.

Soybeans: Futures were firmer for much of the overnight session, but buying faded late. As a result, we are cautiously calling soybeans mildly higher this morning. While news of face-to-face trade talks between the U.S. and China in October is mildly supportive on the surface, the market wants to see some actual documented movement on trade negotiations.

 

Wheat: After corrective gains Wednesday, bargain buyers were out again overnight. That should lead to followthrough buying on the open this morning. But a lot will depend on how the corn market performs. If corn can’t sustain or build on overnight price strength, wheat may struggle to hold onto its gains, as supportive news is lacking.  

 

Livestock Calls

Cattle: Choppy to lower
Hogs: Mixed

 

Cattle: Price action is likely to favor the downside in live cattle futures this morning after initial cash cattle prices were lower than last week. While futures are trading below the cash market, traders will continue to take a cautious approach. Until the cash market signals a low is in place, buying in futures will remain limited.

Hogs: October lean hog futures finished higher Wednesday, but the lead contract now holds just over a 50-cent premium to the cash index. And the cash market is trending lower. The average national direct cash hog price dropped another 63 cents yesterday. The premium in October futures and the weakening cash market will limit buying in the lead contract. Deferred lean hog futures faced profit-taking yesterday, but China’s imports of U.S. pork are surging, despite hefty tariffs. News the U.S. and China will hold trade talks in October could provide some support, but we aren’t confident enough to call the market higher on the open. Traders are also watching Hurricane Dorian, which is hitting the Southeast Atlantic Coast this morning and will temporarily impact hog slaughter in North Carolina.

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