Ahead of the Open: Corn Seen Up on Demand; Soy, Wheat Press Lower

Posted on 02/20/2019 7:58 AM

Grain Calls

Corn: Up 1 to 2 cents
Soybeans: Down 3 to 5 cents
Wheat: Down 5 to 7 cents

General Comment:  Both U.S. and Chinese officials are pushing for leverage and the devil is in the details for a new trade accord. The latest major news in the trade saga is that the U.S. has asked China to keep its currency stable in a move aimed at discouraging officials in Beijing from devaluing the currency to offset the impact of sanctions. The request may backfire: A more managed yuan would reverse China’s longer-term policy of allowing market forces to set the level of the currency. Still, on Tuesday, President Donald Trump said negotiations with China were going well and suggested he was open to extending the deadline to complete them beyond March 1.Meanwhile, the Global Times, published by the ruling Communist Party's official People's Daily, said in a Wednesday editorial that both sides must remain calm during the current talks, but that Washington must not force anything on Beijing because it could lead to counter measures and that would be a catastrophic trick to global stock markets. "U.S. demand for China's structural reform must stay in line with China-U.S. trade cooperation and coordinate with China's reform and opening-up. The talks must not try to force Beijing to change its economic governance or even its development path," it said. Today, the political “big guns” of U.S Trade Representative Lighthizer, U.S Treasury Secretary Mnuchin and China Vice Premier Liu He will be meeting in Washington to further advance the trade talks.

South America weather remains price negative. Storms affect several areas at varying times during the next 10 days. Heat and dryness continue through Friday in Argentina then breaks with scattered storms and cooler weather next week.

Corn: market seen steady to firm on speculation China will expand imports of U.S. corn. U.S. ethanol production margins continue to recover, a positive development. EPA acting administrator Andrew Wheeler rejected a proposal from his staff that would have reduced the ambition of the nation’s biofuel policy over the next three years, arguing the targeted range it included for annual ethanol consumption was too low. Big jump in open interest yesterday with noted call buying could be a sign yesterday drop was a bear trap.

Soybean futures seen slightly lower on South America weather and chart-based selling. The market remain wary about this week’s trade talks and the long-term outlook for Chinese demand for soybeans amid the growing African swine fever outbreak that has now reached Vietnam.

Wheat futures seen weaker as charts continue to attract new technical selling. Traders are waiting for Egypt’s GASC tender for April deliveries today.  It will be interesting to see if the decline in Russian prices over the past 10 days allows for a new sale. Russia fob wheat offers have been too high in recent tenders which has allowed U.S. and Eastern European wheat to be sold. Friday’s six weeks of export sales data needs to show enlarged demand from non-traditional buyers. U.S. wheat is priced to gain a sizable share of world trade.


Livestock Calls:

Cattle: Steady to firm

Hogs: Lower

Cattle futures seen steady to higher with the pressure on the bulls to push futures into new highs. Fresh beef was mixed on Tuesday with Choice down 12 cents and Select up 54 cents. Movement was moderate to active. Slaughter the first two days of this week was 214,000 head, down 20,000 from a week earlier and up 1,000 head from last year. Winter storm continues to barrel through the Midwest and Plains, further raising fears about reduced beef production. Friday’s Cattle on Feed reports is expected to show feedlot numbers on Jan. 1 are up 2.2% from a year ago after placements rose 1.5% in December.

Hog futures are seen lower in followthrough selling to the limit down losses on Tuesday. Limits expand to $4.50 today. The national cash hog price was down 2 cents while Iowa/Minnesota prices fell 38 cents. The wholesale pork carcass prices fell $1.67 Tuesday to $59.91 yesterday on big sales.  More than 470 loads of pork sold Tuesday, the most since Jan. 15. The problem remains slaughter. In the first two day of operations this week, packers processed 957,000 hogs, up from 897,000 a week ago and 875,000 a year ago. Slaughter this year is up 5.4% from a year ago through Feb. 16. That’s well above the 2 to 3 percent forecast in USDA December report. Part of yesterday’s plunge in prices was tied to fears Chinese consumers may turn away from pork because of more case of infected pork found sold to retailer. … China’s ag ministry yesterday said it had confirmed a case of African swine fever (ASF) in Shandong province, the first case in this major livestock production area of eastern China.

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