Ahead of the Open: Corn Seen Higher on Exports; Soybeans, Wheat Slightly Lower

Posted on 09/21/2018 8:09 AM

Grain Calls 

Corn:  Steady to up 1 cent

Soybeans: Down 5 to 7 cents

Wheat: Down 2-4 cents

General Comment:  World stocks are rallying with the MSCI All-Country World Index rising to the highest since March 13 and the U.S. S&P 500 is coming into Friday at a record high on speculation that the latest exchange of tariff levies between the U.S. and China may be less damaging to the world economy than initially feared. Both U.S. and China imposed 10% tariffs this week, less than the 25% signaled earlier and Chinese Premier Li Keqiang pledged this week that Beijing will not engage in competitive currency devaluation, calming investor fears the trade war would escalate. While stocks are taking a more optimistic stance, the ag markets need to see a deal for a sustained rally. Canada and the U.S. showed few signs on Thursday of closing a deal to revamp NAFTA, and Canadian officials made clear Washington needed to withdraw a threat of possible autos tariffs.

Corn futures are seen opening steady to firmer. Prices are up slightly so far this week after setting new contract lows on Tuesday. Rising prices this week has been spurred by funds buying back large short positions.  A higher weekly close would be positive and a close above Thursday’s high at $3.56 ¼ in December contract would suggest a seasonal low is forming. USDA said this morning that private exporters sold 121,700 metric tons of corn to unknown destinations for delivery this marking year. That should add some support to early trading. Harvesting across the northern Midwest has stalled with heavy rain this week with some drier weather the next several days for increased collection activities. Green Plains official disputes reports earlier this week that the company was closing two Iowa ethanol plants—one in Superior and one in Lakota. 

Soybeans market seen slightly weaker after the surprise rally that past two days on rumors Argentina was selling domestic supplies to China and replacing them with cheaper U.S. imports. Early harvest yields are good and pointing to a record U.S. harvest, possibly bigger than the current USDA forecast. Two cargoes of U.S. soybeans are heading to China with the first expected to arrive today and a second on Sept. 26, according to Reuters.  The key to watch will be if China customs slow clearance of U.S. supplies by ramping up inspections, as happened with pork, fruit and log shipments earlier this year. Could be an important session for near-term price direction as futures are still headed for a higher weekly close despite today’s early setback. This morning, USDA reports 100,000 MT of soybean meal sold for delivery in the 2018-19 season to unknown destinations.

Wheat futures seen weaker and most likely a two-sided trading affair after wheat lagged the gains in corn and soybeans on Thursday. The weekly export sales report Thursday was not strong enough to signal more overseas buyers are turning to U.S. supplies. Sales were 468,000 MT last week and total commitments are 22% behind last year and 14% behind the pace needed to reach the current USDA forecast. Some support expected from the Buenos Aires Grain Exchange reporting the wheat crop was rated 43% in “good” to “excellent”, down from 71% last year as rains have missed the western wheat growing areas this week. It might be getting too wet in parts the Brazil wheat belt ahead of the harvest. Dry forecasts continue for Australia and central Europe European and Black Sea wheat futures are trading higher for the week and near weekly highs. Winter wheat futures in Chicago are headed for a higher weekly close as world supplies tightened.

Livestock Calls

Cattle: Mixed

Hogs: Steady to firmer

Cattle seen opening mixed this morning after the recent three-week rally stalled.  Prices are currently heading for a lower weekly close. The market should find some light support from a firmer beef markets yesterday with Choice up 27 cents and Select gaining 73 cents. Movement improved this week at the lower values earlier this week, underscoring the strong demand for beef. Slaughter this week is up 1.9% this week. Beef export sales rose to 15,900 MT last week, but still were 16% below the prior 4-week average according to USDA data on Thursday. Later today, USDA is expected to report on feed numbers up 5.4% to a record for Sept. 1 after placements rose 4.4% last month.

Hogs seen steady to firm amid sharply higher cash hog bids this week. The national average price was $58.40 on Thursday, up $9.48, or 19%, in the past week. Midwest packers have scrambled to boost production to make up for lost output in North Carolina following shutdowns from Hurricane Florence flooding that continues today. Wholesale pork carcass rose 56 cents yesterday to the highest since July 23 and has now trading above year earlier levels. China’s ag ministry reported two new cases of African swine fever—one in Jilin province and the other in the Inner Mongolia region on Friday. Pork prices in parts of China are 30% since the disease outbreak last month, according to researcher Shanghai JCI Intelligence.

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