Ahead of the Open: Corn, Soybeans Consolidate Recent Gains: Wheat Firms on Exports

Posted on 10/09/2018 7:58 AM

Grain Calls

Corn: Mixed

Soybeans: Down 2 to 3 cents

Wheat:  Up 2 to 4 cents

General Comment:  Chinese Commerce Minister Zhong Shan said that the U.S. shouldn’t believe that ever-higher tariffs can force the country’s government to capitulate to American demands. The comments in a written statement to Bloomberg highlight the impasse between the world’s two largest economies. The Trump administration is getting uneasy about the depreciating yuan, which saw its lowest daily fixing in more than a year today. The Treasury Department is weighing whether to name the country a currency manipulator in a report due out next week. The International Monetary Fund cut its forecast for global growth to 3.7 percent for this year and next, down from 3.9 percent previously. It blamed escalating trade tensions and stresses in emerging markets for the reduction. The policy lender warned of a recession in Argentina and slower growth in Brazil. The U.S. Treasury bond selloff continues, with the yield on the 10-year benchmark hitting 3.25 percent, the highest since May 2011. The move comes as the market braces for $74 billion in new supply this week. Fast-moving Hurricane Michael is strengthening as it heads towards Florida, where it’s expected to make landfall tomorrow and then turn northeast into the Carolinas later this week. The U.S. Midwest weather forecast has soaking rains for most of the region the next two days; turning drier for the end of the week and most of the weekend; more rains are seen for the southeast half to two-thirds of the region early next week. Temperatures will be running below average in much of the region next week.

Corn futures are seen steady to a bit weaker on drier weather forecasts into next week for improvement in harvest progress. Buying interest also curtailed by caution ahead of the USDA Crop Production and World Supply and Demand Reports on Thursday. Trump administration is expected to announced today that it will be allow year-round sales of E15 ethanol. President Trump travels to Council Bluffs, Iowa today for a political rally. December futures have paused below the $3.70 price level, signaling that price will be a key barrier to close above to signal the uptrend is resuming. 

Soybean market heads for a second day of declines after rising to a six-week high on Monday and reversing. Better U.S. harvest weather and trade expectations for USDA to project both a record U.S. crop and carryover in Thursday’s reports.  Much of Brazil will get beneficial rain in most areas over the next 10 days while rains will be more hit or miss across Argentina, which has been drier than normal the last 60 days in 60% of the producing region. Soybeans and soybean meal futures need to rise and close above Monday’s highs to improve the near-term price outlook.

Wheat futures seen slightly higher after hitting a 1-week low overnight on continued stiff competition from Black Sea supplies on the world markets amid a stronger U.S. dollar. Support may develop on new export business. USDA reports this morning that private exporters sold 120,000 MT of hard red spring wheat to Bangladesh for delivery in the 2018-19 marketing year. Prices are rebounding above the 20-day moving average, encouraging some short covering by funds.

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to weak

Cattle futures seen starting steady to firm. Monday’s rebound from early losses was an important sign of near-term strength. Monday’s lows re key support should the wholesale beef market remain under pressure this week. On Monday, Choice beef prices fell 4 cents and Select rose 7 cents. Choice cutouts now at the lowest this year. Negotiated cattle trade on Monday was inactive on light demand. Slaughter was 114,000 head on Monday, down from 119,000 a week earlier and 115,000 a year ago. Feeder cattle trading was sharply lower Monday at Oklahoma auctions, adding to overhead resistance to rallies today.

Hog futures seen mixed to start after Monday’s late recovery. Wholesale pork carcass prices fell 63 cents to the lowest since Sept. 19. Cash hogs slightly lower on Monday. Pork sales improved last week as slaughter fell 53,000 head from a week earlier as mechanical problems in North Carolina curbed production the last three days of the week.  On Monday, slaughter rose to 473,000 from 456,000 a week ago. China continues to deal with an outbreak of African swine fever that its ag ministry labels as complex and severe, noting that prevention and control efforts are at a pivotal time. The country has officially reported 28 cases of the disease in eight provinces, lending underlying support to U.S. futures.



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