Ahead of the Open: Corn, Soy and Wheat Surging Higher as Wet Weather Weighs on Crop Outlooks

Posted on 06/17/2019 8:02 AM

Grain Calls 

Corn: Up 7 to 9 cents
Soybeans: Up 12 to 15 cents
Wheat: Up 6 to 9 cents

General Comment: Gap and go. Both corn and soybean prices opened above last week’s highs with corn jumping more than that 2% to a new-five year high on the continuation charts with soybeans up for a sixth-straight session. Wheat rose to near a 10-month high.U.S. planting weather during the weekend was best in the Delta, southeastern states and most other areas south of the Ohio River Valley. U.S. rainfall during the Friday through Sunday afternoon period was greatest from North Dakota through Minnesota and parts of Wisconsin and the northeast half of Iowa to Illinois, Indiana and Ohio  Rainfall ranged from 1 to 3 inches from north-central Iowa into central and southeastern Illinois, central and interior southern Indiana and central through southwestern Ohio.  U.S. weather will be wet this week to maintain slow planting progress, although some fieldwork will advance. The lower Midwest will be wettest this workweek while rainfall will be lightest in the northwestern Corn Belt.  Near- and above-normal rainfall of 2 to 4.5 inches affects the central U.S. over the next two weeks.  Temperatures will be unseasonably cool across the northwest two-thirds over the next 10 days, followed by a sharply warmer period over June 25-30.

The trade will be looking for bean planting to come in around 78% to 80% in tonight’s weekly report, up from 60% completed last week. Corn planting may rise to 93% to 95% completed as of yesterday, up from 83% reported planted a week ago. The season’s second corn condition ratings report is expected to show corn rated “good” and “excellent” to be 59% to 62%, compared with from 59% last week. Winter wheat conditions may have slipped slightly with the heavy rains while harvest advanced near 10% to 12% as of yesterday, up from 4% last week. The crop report will set the tone for fundamental discussions this week on area planted and yield potential. 

The Federal Open Market Committee two-day meeting that concludes Wednesday is shaping up as a pivotal one for Wall Street, with stocks primed for a selloff should the Fed fail to take an even more dovish tilt after policymakers raised expectations for a rate cut in recent weeks. According to CME's FedWatch tool, money market traders are pricing in an 88.4% chance of a rate cut of at least a quarter of a percentage point in July.

The U.S. Trade Representative's Office on Monday will kick off seven days of testimony from U.S. retailers, manufacturers and other businesses about President Donald Trump's plan to hit another $300 billion worth of Chinese goods with tariffs. The hearings beginning Monday will end on June 25. That timeline means Trump would not be able to trigger the fresh wave of tariffs until after July 2, when a seven-day final rebuttal comment period ends. Trump has said he wants to meet with Chinese President Xi Jinping during June 28-29 G20 leaders’ summit in Japan, but neither government has confirmed a meeting. The proposed tariffs on another $300 billion are a further "response to China’s unfair trade practices related to technology transfer, intellectual property, and innovation," USTR said in its statement Friday. US Commerce Secretary Ross downplayed the prospect of a major trade deal emerging from the G20 meeting. “I think the most that will come out of the G-20 might be an agreement to actively resume talks,” Talks between China and the U.S. broke off in early May.

Hong Kong's leader Carrie Lam apologized to citizens on Sunday as an estimated 1 million-plus black-clad protesters insisted that she resign over her handling of a bill that would allow citizens to be sent to mainland China for trial. This is becoming the most significant challenge to China’s relationship with the territory since Britain handed it back to China 22 years ago. Sunday's demonstration came despite Lam indefinitely delaying - though not withdrawing - the bill on Saturday in a dramatic climbdown that threw into question her ability to continue to lead the city.

Meanwhile, the United States and other western countries have objected to a visit by the United Nations counterterrorism chief to China's remote Xinjiang, where U.N. experts say some one million ethnic Uighurs and other Muslims are held in detention centers. Vladimir Voronkov, a veteran Russian diplomat who heads the U.N. Counterterrorism Office, is in China at the invitation of Beijing and is due to visit Xinjiang's capital Urumqi. U.S. Deputy Secretary of State John Sullivan spoke with U.N. Secretary-General António Guterres on Friday “to convey deep concerns” about Voronkov’s trip because “Beijing continues to paint its repressive campaign against Uighurs and other Muslims as legitimate counterterrorism efforts when it is not.”

USDA daily export reporting service announced  no new large sales this morning. 

Corn: Charts are positive, and weather remains threatening. The weekly CFTC reported showed funds increase net-long positions 23,969 futures and options contracts to 111,212 contracts, about what was expected but probably added another 100,000 contracts plus the last three days of last week. Commercials added 31,774 contracts to their net-short position of 372,510 as of last Tuesday.

Soybeans: July futures are the highest since early March this morning. There is strong resistance from $9.21 to $9.31. Funds cut net-short positions 2,201 contracts and were holding 91,155 net-short futures and options as of last Tuesday. That’s positions probably was whittled down another 30,000 to 35,000 contracts the final three days of last week. Members of the National Oilseed Processors Association (NOPA) will likely report later this morning they crushed 162.474 million bu. of soybeans last month, according to analysts polled by Reuters. That would fall short of the May 2018 record of 163.572 million bushels.

Wheat: SRW futures rose to the highest since August overnight, rising near key overhead resistance. Hard red winter wheat areas and the Midwest stays much too wet threatening crop quality and production. Canada Prairies received some much-needed moisture Friday into Sunday morning; however, the precipitation was erratic, and many areas still need substantial rain to ease long term dryness. Eastward drifting high pressure ridge in western Russia and eastern Ukraine will likely suppress rainfall over the next ten days. Dryness will continue most serious from eastern Ukraine to western Kazakhstan, but areas north through the Volga River Basin will also experience a net drying bias for Russian spring wheat. Temperatures west of the Ural Mountains will be warmer than usual.

Livestock Calls:

Cattle:  Steady-weak

Hogs: Weak

Cattle: Live cattle seen slightly lower to start buy underlying support should hold. Mixed beef prices and steady cash cattle last week should limit fresh selling. U.S. retail sales increased in May and sales for the prior month were revised higher, suggesting a pick-up in consumer spending that eased fears the economy was slowing down sharply in the second quarter. The upbeat report from the Commerce Department on Friday shows consumer remain upbeat and that great news for strong beef demand through the summer.

Hogs: Futures seen steady to lower after funds sold the market sharply lower to limit down on Friday. However, the national average cash hog price rose 16 cents last week to $75.79 and the pork cutout value inched up 13 cents. Ham prices rose to the highest since December 2014 last week before settling back by Friday. Ham demand may be coming from Mexico now that tariffs have been eliminated. The key remains seeing an improvement in the other cuts and stronger sales to China. The firmer cash fundamentals should help the cash hog market find a bid this morning. The problem is slaughter remains record large, up 219,000 head last week from a year ago and 14,000 head higher than a week earlier.

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