Ahead of the Open: Corn, Soy See Light Harvest Pressure, Wheat Bounces from Two-Week Lows

Posted on 10/29/2019 7:49 AM

Grain Calls

Corn: Steady to down 2 cents
Soybeans: Down 2 to 4 cents
Wheat: Up 2 to 4 cents

General Comment: Look for slightly defensive trade in corn and soybeans amid harvest progress, albeit well behind average pace. Both markets slipping to new lows for this current downdraft and are challenging key support. Wheat futures seen firming after a hard drop to two-week lows on Monday. 

Midwest weather forecast has a storm system continuing through the southeastern two-thirds of the region through Thursday with rains followed by some snowfall. Things quiet down for the weekend and for much of next week. Temps flow from above to below through the region with the storms. The U.S. Corn crop was 41% harvested on Oct. 27, well behind the five-year average of 61% and soybeans were 62% harvested, compared with the 78% average.

The South American weather forecast didn’t seem to change much with rains in northern Argentina, southern Brazil over the next 5 days. The 6- to 10-day outlook is dry for Argentina with rains to fall in most of the Brazil growing areas. Temps run below average in Argentina with average to above average in Brazil over the next 10 days.

The election of Alberto Fernandez as the next president of Argentina over the weekend has introduced speculation that the country will boost export taxes on its soybeans and grains. The country currently has a 25% tax on soybean exports and 7% on other grains. Argentina potentially becoming less competitive is good news but may take time to result in actual new business, especially for corn. 

European shares fell for the first time in seven sessions on Thursday and U.S. stocks are expected to be weak today as disappointing European and U.S. earnings dampened optimism surrounding the U.S./China trade talk progress and ahead of the expected interest-rate cut by the U.S. Federal Reserve on Wednesday. 

The U.S. oil and corn industries will continue a long-running public battle over America’s biofuels policy on Tuesday during a Congressional hearing about the Trump administration’s use of “secret waivers” for refineries. The hearing set by the Energy and Commerce Committee will air out the grievances of two key political constituencies heading into next year’s election at a time President Donald Trump has been working hard to win them over. No Trump administration officials will testify today.

USDA daily export sales reporting services said private exporters did not report any new large sales in the past 24 hours.  

Corn: December corn broke last week’s low and is just above key support at $3.78 ¼ to $3.80. China's corn futures rose by their most in almost seven months on Tuesday on better-than-expected feed demand for the grain and snowy weather raising concerns about unharvested crops.  Farmers are moving to raise fatter pigs to cash in on soaring pork prices boosting corn demand. Firm U.S. corn basis levels continue to be offset by slow export sales and shipments. The market will need confirmation of a smaller crop when USDA updates it’s projection on Nov. 8, to resume this fall’s rally.

SoybeansNovember futures cash basis levels improve, export demand is relatively strong, and South America weather isn’t ideal. Looking ahead we fully expect the USDA to lower yield in the Nov. 8 crop report next week. Once we get past this week, the majority of harvest is behind us, we are in a timeframe that we can get export business and with cash basis continuing to strengthen.

Wheat: Futures seen rebounding from new two-week lows as Russian exports in October fell to 3.2 million metric tons (MMT), down from 4.1 MMT a month earlier. Gains will be limited by the good start to this year’s winter wheat crop. Plantings were 85% completed as of Oct. 27, compared with 77% a year ago, and 82% average. The USDA’s first condition report showed the crop was rated 56% “good” to “excellent” versus 53% a year ago. When USDA’s initial crop condition ratings of the fall are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500 point scale, with 500 being perfect), the HRW wheat crop starts with a rating of 353.7 points, which is 13.7 points above last year and 0.6 point above the five-year average. The initial SRW CCI rating of 340.8 points is 26.6 points below last year and 31.7 points below the five-year average.  

Livestock Calls
Cattle: Steady to firm
Hogs: Steady to mixed

Cattle: Live cattle should start steady to firmer, extending Monday’s rally. Wholesale beef prices continued higher on Monday with Choice rising $2.46 and Select gaining 92 cents. However, sales were extremely slow. In the week ended Oct. 26, dressed weights fell 2 lbs. to 822 lbs. from a week earlier. Traders are looking for cash cattle to trade $1 to $2 higher this week.

Hogs: Futures may try to extend Monday’s rally. Lean hog futures closed higher after spending most of the session slightly lower. December futures tested the lows made Oct. 8 and rebounded. The buyers came back into the close as support from negotiations with China seem to be progressing favorably. However, the national average cash hog prices fell $1.10 Monday and the wholesale pork cutout value fell 53 cents on continued weakness in belly and loin prices. Sales were slow to start the week.  Slaughter rose 21,000 above a year ago and 3,000 above last week on Monday. All eyes are on each Thursday’s export sales report for pork exports to China.  

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