Ahead of the Open: Corn Seen Building on Tuesday's Recovery on Wet, Cool Weather; Soy, Wheat Try to Follow

Posted on 04/10/2019 7:51 AM

Grain Calls

Corn: Steady to up 1 cent

Soybeans: Mixed-weak

Wheat: Down 1 to 3 cents

General Comment: Grain markets are finding some underlying support but will be mixed to start this morning.  Some support follows USDA Secretary Sonny Perdue said he hoped “we’ll be able to double and triple those numbers,” referring to U.S. ag exports prior to the trade war with China. Structural issues between the two countries are yet to be settled, he said.  Also on Tuesday Treasury Secretary Steven Mnuchin said China has committed “significant” orders for U.S. soybeans, during a House Financial Services Panel hearing.
Wall Street is bracing for large U.S. companies to report a decline in quarterly profits of more than 9% even after raking in higher revenues, something that has not happened in more than a decade and may shift some speculative money into commodities with the Bloomberg Commodity Index breaking out to a four-month high this week. Against a basket of key rival currencies, the dollar was slightly lower. Oil rose near five-month high and spot gasoline futures rose above $2 for the first time since October as OPEC production cuts and U.S. sanctions on Iran and Venezuela continued to tighten supply.  
A spring snowstorm will slam through parts of Nebraska, South Dakota, Minnesota and Wisconsin from Wednesday, potentially dumping 8-16 inches of snow. Frequent rain will fall the next 10 days across much of the central U.S. Farmers in those areas are trying to prepare fields for seeding of spring crops including corn.

USDA did report a new daily sale this morning. Private exporters sold 133,759 metric tons (MT) of soybeans to unknown destination for delivery before the end of this season on Aug. 31.

Corn market is seen slightly higher after shrugging off USDA’s confirmation of larger U.S. and world corn supplies. Prices closed higher Tuesday after dipping to new lows, a positive technical signal for market bears to consider lifting shorts. It was also a sign the market’s attention is shifting to the wet, cold weather outlook, which will increase delayed-planting risks. U.S. stocks as of September 1 were forecast at 2.035 billion bu., USDA said in its monthly supply and demand report, up from its March forecast of 1.835 billion bushels. USDA said its 75 million-bushel cut to the corn export view stemmed from rising competition from Brazil, Argentina and Ukraine. Harvest outlooks were raised in Brazil, to 96 million metric tons (MMT), in Argentina, to 47 MMT, and in Ukraine, to 35.81 MMT.

Soybean futures seen mixed. Soybean stocks were pegged at 895 million bushels as USDA bumped its estimate for soybeans that will be used for seed and trimmed its import projections. In March, it had estimated soy ending stocks of 900 million bushels. While the soybean stockpile was cut for a third straight month, it remains the biggest on record and more than double the amount that was left over heading into the current marketing year. Malaysian palm oil futures fell more than 2% to a one-week low on Wednesday as an official data release from the Malaysian Palm Oil Board (MPOB) showed that March end-stocks and output were higher than forecast. March inventories were down 4.6% from February at 2.92 MMT while output rose 8.3% to 1.67 MMT. Meanwhile, exports surged by 22.4% from February to 1.62 MMT.

Wheat futures are seen falling for a fifth consecutive session on Wednesday, their worst losing streak since February, after a U.S. government report raised its estimate for world wheat inventories.  USDA on Tuesday raised its forecast of global 2018-19 wheat ending stocks to 275.61 MMT, topping the highest in a range of trade expectations. Any U.S. wheat that is not exported is largely forecast to end up in inventories. The USDA also boosted its estimate of domestic wheat supplies. In a weekly crop progress report late on Monday the USDA rated 60% of the U.S. winter wheat crop in “good” and “excellent” condition, up from 56% a week earlier in a sign of improving yield prospects FranceAgriMer now expects non-EU soft wheat exports in the 2018-19 season at 9.7 MMT, up from the 9.5 MMT last month and 19.5% above last season's volume.

Livestock Calls:

Cattle: Steady

Hogs: Steady to weak

Cattle futures seen firm after futures limited sharp declines in hog futures from taking prices sharply lower. So far this week, there has just been a light cash market test in Nebraska at $126 and in Iowa at $128.50, steady to up a bit versus the week prior. Wholesale beef cutout values fell on Tuesday with Choice sliding 35 cents and Select dropping $2.08. Sales were moderate but should continue to improve heading into the grilling season.

Hog futures trade will open lower on followthrough selling to limit down losses Tuesday. Daily limits expand to $4.50 today. The national cash hog price rose 12 cents yesterday. While the rally has slowed and limit buying in premium priced futures, the trend is still firming. Pork cutout values fell 18 cents on Tuesday on light to moderate sales. Focus is Thursday’s weekly export sales report and the extent of new Chinese buying.

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