Ahead of the Open: Corn, Soybeans Give Back Overnight Gains, Waiting on Rainfall Coverage

Posted on 07/15/2019 8:12 AM

GRAIN CALLS:

Corn: Down 1-3 cents
Soybeans: Down 3-6 cents
Wheat: Down 4 to 6 cents

General Comment: Corn, wheat and soybeans fell after a strong opening overnight. The market lacked followthrough buying and that triggered light selling and profit taking this morning.

The prospect for warm, dry weather across key areas of the Midwest the next two weeks should put floor under prices today ahead of the USDA Crop Progress Reports tonight. The warm/dry weather was initially favorable for crops, but it has now turned adverse with broadening reports of corn rolling in the afternoon heat. The need for rain in Iowa and parts of Illinois is immediate and includes some surrounding states. Remnants of Hurricane Barry will push east and south of this key ag area. The rains from Barry are farther north than indicated on Friday and its moisture will aid parts of Indiana and Ohio. A cold front pasts the next three days and may bring beneficial rain to parts of the northern Plains, Minnesota, Wisconsin and northern Iowa. These rains will be light and scattered and is unlikely to push very far south. Dry, warm weather immediately follows and last until late next week.

The markets have not seen this type of weather anxiety since 2012 and indicates the crop issues are real. This tells us these crop issues are for real.  Maybe a third of the corn will be pollinating this week with temperatures rising into the mid-90s. Traders have mixed ideas about tonight’s crop progress report with some looking for small declines in corn and soybean conditions with other looking for steady to better conditions as crop benefits from warmer weather. Look for USDA to report active winter wheat harvest and better spring wheat conditions.

 China's economic growth slowed to 6.2% in the second quarter as expected but still the weakest pace in at least 27 years. The more upbeat June factory output and retail sales offered signs of improvement and lent support to Chinese stocks. Beijing will continue to roll out more support measures in coming months to fight the negative impacts of U.S. tariffs, suggesting a long trade war.

USDA daily export reporting service said private exporters did not report any large new farm commodity sales.

Corn: Prices gapped higher overnight but could not take out the highs from two weeks ago, turning lower.

Soybeans:  Futures also gapped higher and ran into overhead session on worries about demand.

Members of the National Oilseed Processors Association (NOPA) will likely report they crushed around 154.405 million bu. of soybeans during June, according to a poll conducted by Reuters. That would be down from May and the smallest monthly crush since February 2018. But there’s a lot of uncertainty going into the report based on the overly wide range (16.6 million bu.) of survey guesses.

Wheat: Wheat prices are pressured by advancing winter wheat harvest and worries about export demand.

LIVESTOCK CALLS:

Cattle: Mixed
Hogs: Mixed

Cattle: Cash cattle trade got off to a late start this week, with action picking up Friday between $114 and $116 in Iowa and around $115 in Nebraska, steady to a few bucks higher versus the week prior. We are still waiting for official confirmation of action farther south. Cattle weights continue to point to a very current marketing situation, but boxed beef values have been under pressure of late. Futures start the week well under what’s been reported on the cash front so far.

Hogs:  Cash hog bids marched higher over the past week, with bids edging another 16 cents higher on Friday. This has helped the CME cash hog index to move sideways in recent days, though it has yet to turn up. The pork cutout value slid 52 cents on Friday and movement was decent at 328.26 loads. Traders are optimistic that competitively priced pork will help the market chew through an abundance of pork from recent high slaughter tallies. Last week’s kill was up 8.8% from year-ago levels according to USDA. China produced 24.7 million metric tons (MMT) of pork in the first six months of 2019, down 5.5% from a year earlier, according to figures from the National Bureau of Statistics, amid a severe epidemic of African swine fever. China's hog herd declined 15% from a year ago to 347.61 million head, the bureau said. But figures from the Ministry of Agriculture and Rural Affairs on the same day said the herd had shrunk 25.8% in June from a year earlier. Retail pork prices reached 26.45 yuan per kg in the final week of June, up 33% on the year, according to weekly data from the Ministry of Agriculture and Rural Affairs, but still some way off the record of 31.56 yuan in June 2016. Output of poultry meat rose 5.6% in the first six months, while beef output increased 2.4% and lamb output rose 1.4%, the bureau said.    

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