Ahead of the Open: Corn Seen Leading Retreat on Fund Liquidation Amid Wetter Forecasts

Posted on 07/09/2019 8:11 AM


Corn: Down 6 to 8 cents
Soybeans: Down 4 to 6 cents
Wheat: Down 3 to 7 cents

General Comment: Corn is seen falling four the first time in five sessions and soybeans are testing three-week lows as rains move into the Midwest today and more is forecast next week limiting crop stress from a warmer, drier bias starting tomorrow and lasting about a week. Not all forecasts are in agreement about next week’s rain providing a general soaking. That uncertainty should help to put a floor under the markets today ahead of the USDA supply and demand updates on Thursday.  Wheat is seen following corn lower with winter wheat harvest nearly 50% complete and rains aiding U.S. spring wheat and few areas in the Canadian Prairies. More is still needed in Alberta and parts of Saskatchewan.

Top negotiators from Washington and Beijing are set to speak this week to revive stalled trade talks, as disagreements over prior commitments and political considerations threaten to bog down discussions. China has made no official mention of a commitment to purchasing more U.S. ag products, and a person with knowledge of the event said Chinese Leader Xi Jinping made no such promise, according to Reuters. Shortly before the presidents’ meeting two weeks ago, China purchased 544,000 metric tons of U.S. soybeans, the largest Chinese purchase since March. Last week, the first-ever large-scale sale of U.S. rice to China was announced by USA Rice.

USDA daily export reporting service did not report any new large sales this morning.

Corn: December is testing the 40-day moving average to close out the overnight session as funds liquidate longs. The CFTC trader position report showed managed money net-long position fell about 6,300 futures and options to 181,600 contracts. From June 25 to July 2 the Dec corn contract was down 31 ½ cents. Commercials increased net-short positions to 484,109 contracts from 475,536 a week earlier. Just 8% of the nation’s corn crop is silking compared with 22% on average the past five years. Today’s report shows just 1% of the corn crop in Indiana and Iowa is currently at silking. Some of the top-producing states have no corn at silking yet, including Minnesota, Ohio and Wisconsin. Fifty-seven percent of the U.S. corn crop overall is rated “good” to “excellent” condition, up 1 percentage point from a week earlier and the lowest for the week since the 2012 drought.

Soybeans:  The soybean crop is also extremely behind its normal progress. In a typical year, 32% of the nation’s soybeans are blooming at this point in the season. This year, just 10% of the crop is at blooming—a far cry from last year’s 44% at this time. Soybean conditions unexpected slid by one percentage point last week to 53% rated “good” to “excellent” condition, the third lowest rating for the date behind only 2012 and 2002. For soybeans, the most recent CFTC report had the managed money net short about 37,000 contracts, selling 2,900 contracts on the week.  In the week ended July 2, November beans were down 27 ¾ cents.

Wheat: Traders are looking for some clues on world prices with Egypt tendering for delivery in August today. GASC Vice Chairman Ahmed Youssef said the authority was seeking to buy cargoes of soft and/or milling wheat from the United States, Canada, Australia, France, Germany, Poland, Argentina, Russia, Kazakhstan, Ukraine, Romania, Bulgaria, Hungary, Paraguay and Serbia. Wheat exports from Russia, Ukraine and Kazakhstan will rise 4% in the 2019/20 marketing season, a Reuters poll showed, as June's heatwave failed to offset favorable weather in the winter, signaling tough competition with the European Union. The winter wheat crop harvested is 47% complete with the trade expecting 45% complete. Spring wheat crop ratings are 78% G/E compared to 75% G/E last week and trade expecting 76% G/E. The latest CFTC report had the managed money net long 37,100 contracts of SRW wheat buying about 5,600 contracts on the week when prices fell 36 ¾ cents. The larger net-long position is limiting buying interest today.


Cattle: Mixed to weak
Hogs: Steady to weak

Cattle: It was a mixed to weaker trade to start the week in the cattle market on Monday, which was disappointing considering the strong close on Friday and last week’s higher cash cattle trade. But when taking a step back we need to acknowledge the futures discount to the cash market which should offer support. The concern is weak beef prices. Packers may have excellent margins, but signs of demand market would need to come from the product trade. The managed money continues to liquidate long cattle positions selling 6,700 contracts this past week as they are net long 22,700 futures and options contracts.

Hogs: Futures set new contract lows in several contracts on Monday, pressuring the opening today.  Daily hog slaughter was 479,000 head, up 36,000 head from a year earlier. The market is disappointed with lack of news regarding potential Chinese demand and with the recent weakness in pork prices. The July contract will go off the board next week and then Aug will be front month with a $6 premium to July futures, that is where the pressure in August is coming from. If pork product values could stabilize this week, it would go a long way to establishing a low in the market.

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