Ahead of the Open: Corn, Soy Seen Rebounding Slightly Before China Trade Talks in Washington This Week

Posted on 04/01/2019 7:45 AM

Grain Calls

Corn: Up 1 to 3 cents

Soybeans: Up 4 to 6 cents

Wheat:  Mixed

General Comment: Grain markets are drawing support from optimism that U.S.-China trade talks are progressing and after Chinese importers on booked their second and third large U.S. soy purchase this month. China's State Council said on Sunday that the country would continue to suspend additional tariffs on U.S. vehicles and auto parts after April 1, in a goodwill gesture following a U.S. decision to delay tariff hikes on Chinese imports. Following last week’s talks in Beijing the continuing high-level negotiations between the U.S. and China move to Washington this week, with Vice Premier Liu He due in the capital this morning for talks on Wednesday. The New York times reports that a trade deal is 90% completed with both sides still checking the wording in both English and Chinese are correct.
Asian stocks were higher overnight on fresh signs of stabilization in the Chinese economy, with the official manufacturing purchasing managers index rising after February’s disappointing data. Across the region PMIs showed sentiment stabilized in the month, with rises in both Japan and South Korea. It was a different story in the euro area, with already disappointing German data revised lower to 44.1 while a jump in U.K. manufacturing PMI was almost entirely driven by stockpiling. U.S. final March PMI and ISM manufacturing are scheduled for later this morning.

Crude oil is trading near the highest since November after posting the best March gain since 2009. 
The main storm track aligns across the central U.S. over the next two weeks, with three storm systems producing pockets of moderate to heavy rain in varying areas. Widespread coverage of near- and above-normal rainfall with highest totals centered in the Delta. Temperatures turn very mild for April 5-10, which will rapidly melt away all lingering snowpack in far-northern areas and may add to flooding. Weather remains favorable for crops in Brazil and Argentina.

USDA reported a new China daily export sales announcement this morning. Private exporters sold 828,000 metric tons (MT) of soybeans for delivery to China during the 2018/2019 marketing year. On Friday, USDA reported private exporters sold 816,000 MT of old-crop soybeans to China.

Corn market is seen higher on bargain buying helped corn prices rise near short-term resistance overnight after the market suffered its biggest one-day drop in nearly three years on Friday after USDA said March 1 inventories were far above trade estimates. in the previous session due to pressure from ample supplies. In its quarterly stocks report, the USDA pegged domestic corn supplies as of March 1 at the third-biggest on record.  Of the 8.6 billion in storage on, corn held on farms rose 3% to 5.13 billion. USDA also surprised the market with its implied usage estimated falling 9.3% from a year ago despite record animals on feed. That means USDA understated last year’s crop yield by at least 2 bushels an acre. Large speculators trimmed their net short position in CBOT corn futures by almost 58,000 contracts to 203,414 futures and options in the week to March 26. Funds were big sellers on Friday sharply retreat. South Korea's Major Feedmill Group (MFG) purchased about 69,000 metric tons (MT) of corn in a private deal on Friday without issuing an international tender, European traders said on Monday. It was purchased at around $189.99 a MT for arrival in South Korea around Oct. 27. MFG had also bought about 69,000 MT of corn in a private deal on Thursday at around $192.90 a MT for arrival in South Korea around Sept. 20. Ukrainian grain exports from sea ports in the week of March 23-29 fell to 590,000 MT from 1.37 MMT a week earlier, the APK-Inform consultancy said on Monday. Corn exports fell 54% while wheat shipments declined by 59%, the consultancy said.

Soybean futures are slightly higher on better use reported in the March 1 Stocks Report and new Chinese purchases of U.S. soybeans. The USDA is scheduled to its February crush report later this afternoon with traders looking for crush to rise to 165.1 million bu. from 165.0 million a year ago and down from 182.8 million in January. Soyoil inventories seen jumping about 200 million lbs. to 2.2 billion lbs. at the end of February. Strategie Grains further cut oilseed production outlooks in the EU. Rapeseed production is seen falling 3.3% from a year ago to 19.32 MMT, down from last months estimates of 19.65 MMT. Sunseed projection also reduced from last month and seen down 2.7% from a year earlier.

Wheat futures are expected mixed waiting for the USDA weekly Grain Inspections Report later this morning. Shipments have been slowly improving and further gains may help support stepped up foreign buying. SovEcon agriculture consultancy said on Friday that it had lowered its forecast for Russia's 2018/19 wheat export forecast by 0.8 MMT to 35.1 MMT. The European Commission raised its forecast for European Union 2018/19 common wheat exports to 19.0 MMT from 18.0 MMT projected last month.

Livestock Calls:

Cattle: Steady to lower

Hogs: steady to mixed

Cattle futures seen slightly weaker on speculation packers will be looking to bid less for supplies this week after cutting bids about $2 on average last week. Slaughter last week fell to 614,000 from 631,000 a week earlier but still up from 590,000 last year. Wholesale beef prices fell on Friday with Choice down $1.40 and Select down 63 cents on sluggish sales. Choice fell $3.05 last week. Last Tuesday, fund held a record net-long position of 148,945 futures and options contracts, so more long liquidation is possible this week. Prices are opening at key support and tonight’s close will be closely monitored.

Hog futures seen opening steady waiting for packer demand. Futures tumbled last week on profit taking. Still, the national average cash hog rose $8.45 last week capping at $30.17 gain in March. Pork cutout values were up $3.45 last week and up $20.84 in March. On March 26, funds increased net-long positions to 24.200, the most since December and up from the largest net-short position for February since 2009. Slaughter last week rose to 2.509 million head from 2.496 million a week ago and 2.376 million a year earlier. China’s ag ministry reports African swine fever (ASF) was found at two pig farms in Hubei province. ASF will means more U.S. pork moving to China.

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