Ahead of the Open: Corn, Soybeans Slump Ahead of USDA Supply & Demand Report

Posted on 10/11/2018 7:57 AM

Grain Calls

Corn: Down 1 to 2 cents

Soybeans: Down 2 to 4  cents

Wheat:  Up 1 to 3 cents

General Comment:  A selloff that sent U.S. stocks tumbling the most since February on Wednesday rolled across the globe overnight and added pressure to the U.S. grain markets ahead of the USDA’s monthly supply and demand reports later this morning.

China’s benchmark Shanghai Composite Index crashed 5.2% near a four-year low and in Europe the Stoxx 600 Index slumped to the lowest level in 21 months. President Donald Trump accused the “loco” Federal Reserve of “going wild” with interest-rate increases this year while insisting his trade war with China wasn’t a factor in yesterday’s U.S. stock market rout. China's central bank governor Yi Gang has met with US Treasury Secretary Steven Mnuchin on the sidelines of the World Bank annual conference in Bali, Indonesia and exchanged views over "relevant economic and financial issues," the People's Bank of China said in a brief statement on Thursday. Meanwhile, if you look at the top performing currencies, there is not a flight to the dollar, yen or the Swiss franc for safety, but rather gains for the Turkish Lira, the South African rand, and the Hungarian Forint. That doesn't exactly look like global panic is developing, but instead investors looking to buy already beaten down assets.

China's agriculture ministry has cancelled the release of its monthly crop report for October due to a technical problem, a ministry official said on Thursday.

Corn and soybean futures are seen slightly lower ahead of the USDA updated world and U.S. supply and demand forecasts. Traders are generally looking for slightly larger supplies. Drier Midwest weather forecasts will begin to dry fields for increasing harvesting into next week.  Brazil government released smaller crop estimates of their own this morning that should help put a floor under prices before the 11:00 a.m. government reports. Brazil may harvest between 89.73 to 91.08 MMT this season, up from the drought-reduced harvest of 80.78 MMT last year. That’s about what was below trade estimates and smaller than last months’ USDA forecast for 94.5 MMT. Brazil’s soybean production forecast at 117.04 to 119.42 MMT, smaller than trade estimates and last month’s USDA forecast for a crop of 120.5 MMT. USDA reports this morning that private exporters canceled 140,000 MT of corn for delivery to unknown destinations in the 2018-19 season. That news will weigh on corn before USDA reports. How the markets react to the news is more important than the USDA report itself today with much of the bearish supply news already well digested by the the markets the past two months. 

Wheat futures seen slightly higher on further signs of that Russia wheat exports are poised to slow, boosting demand for other supplies, including the U.S. Argentina's wheat crop may fall to 19 MMT from 21 MMT predicted previously, the Rosario grains exchange said on Wednesday, citing dry weather curbing yields. The exchange's predictions for soy and corn production remained unchanged at 50 MMT and 43 MMT, respectively. Dry weather from Europe to western Russia may slow critical root and plant development of winter wheat ahead of dormancy.

Livestock Calls

Cattle: Steady to weak

Hogs: Steady to firm

Cattle futures seen starting steady to weak. Futures dropped to the lowest since Sept. 14 yesterday, keeping pressure on prices to start today.  Choice beef prices fell 74 cents and Select declined 95 cents. Choice cutouts continue to extend this year’s decline with values at the lowest since Dec. 27. Negotiated cattle trade continued inactive and weak. Slaughter was 348,000 head the first three days of this week, down 10,000 head from a week ago and 4,000 head smaller than a year earlier. Packers appear to be in no hurry to boost supplies in a falling beef market.

Hog futures seen steady to higher amid firmer pork prices and a new case of African swine fever in China. Wholesale pork carcass prices rose 14 cents on improving sales for a second day. Slaughter slipped to 1.381 million head this week, down from 1.403 million a week ago and 1.385 million a year ago amid some additional mechanical problems at a Smithfield Foods plants in North Carolina. Earlier today, China announced a third African swine fever case in Liaoning province, the location of the first outbreak two months ago. The latest outbreak comes just a day after China lifted restrictions in Zhejiang province where African swine fever was also found in August. European Union agreed to give Romania $49.4 million to fight the outbreak of ASF that has affected thousands of farms.


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