Ahead of the Open: Defensive on Better Planting Progress, Waiting on USDA Report This Morning

Posted on 06/11/2019 7:56 AM

Grain Calls 

Corn: Down 2 to 3 cents
Soybeans: Steady to down 2 cents
Wheat: Down 3 to 7 cents

General Comment: USDA confirmed increased corn and soybean planting progress last week, but sowing remains record slow for early June. U.S. corn conditions were stronger than traders expected but still well below average for this point in the growing season with more rain and cooler temperatures forecast the next two weeks, slowing emergence and a vegetative growth. That means today’s monthly USDA supply and demand update may raise more questions than it can answer on both the number of corn and soybean acres that will be planted and possible yields this season. Nonetheless the markets are taking defensive posture to start the day. Prices are well contained inside of Monday’s ranges. Tonight’s closes will be an important near-term directional indicator. 

Earlier this morning, Brazil’s Conab raised its estimates of this year’s corn and soybeans crops. Corn production seen at 97.01 million metric tons (MMT), up from 95.254 MMT estimated in May and up from 80.709 MMT last year. Soybean production may rise to 114.843 MMT, above the 114.313 MMT estimated last month and below the 119.282 MMT. Corn exports were forecast at 32 MMT, up from 31 MMT estimated in May and 24.767 last year. Soybean exports were left unchanged from last month’s 68 MMT but still down from a record 83.257 MMT. 

On Monday, President Donald Trump threatened to impose further tariffs of 25% or more on $300 billion in Chinese goods if President Xi Jinping doesn’t sit down with him at the Group of 20 summit in Japan this month. The comments increase the pressure for a potential meeting between the leaders. China foreign ministry did not confirm any meeting plans and promised it will respond firmly if the United States insists on escalating trade tensions.  This morning, U.S. Commerce Secretary Wilbur Ross told CNBC a definitive trade deal with Beijing could not be made at the summit in Japan although the forum could help create a path forward.  U.S. and Japanese officials will meet this week in Washington to discuss upcoming trade talks. Lower-level talks are set to wrap up today, and U.S. Trade Representative Bob Lighthizer will meet on Thursday with Toshimitsu Motegi, Japan’s minister of economic revitalization.

USDA daily export sales reporting service did not report any new large export sales.

Corn: Futures sliding on crop progress. Farmers took advantage of a recent window of warmer, drier weather to push planting to 83% complete on June 9, up from 67% a week earlier but still behind the 99% average. Just 62% of the corn crop had emerged as of Sunday, which is 31 percentage points behind the norm for this point in the season. USDA said that 59% of the crop was in “good” to “excellent” condition, which was five points higher than the average trade guess but 18 points under last year at this time. The numbers to watch when USDA releases the monthly report at 11:00 CDT today will be the production and yield and how that filters down to carryover inventories. The average estimate for US production is 14.25 billion bu., compared to 15.03 billion bu. estimated in May. The average pre-report estimate for yield is 172.4 bushels per acre (BPA), down from 176.0 BPA last month. The average estimate for old crop ending stocks is 2.123 billion bu., versus 2.095 billion forecast last month. New-crop stocks are forecast to fall to 1.917 billion bu., versus 2.485 billion a month ago.

Soybeans:  About 60% of the U.S. soybean crop had been planted as of Sunday, a 21-point jump from last week and four points more advanced than the market anticipated. But while producers made big strides over the past week, progress is still well behind the five-year average pace of 88% complete with midmonth approaching. That implies 33.847 million acres have yet to be planted. Few expect USDA to come close to reality in today’s supply and demand report given the delays. The average estimate for U.S. production is 4.123 billion bu., compared with 4.150 billion bu. from the USDA in May, and the average trade forecast for yield is 49.0 BPA, trimmed from 49.5 BPA last month.  Traders forecast old-crop ending stocks is 1.004 billion bu. versus 995 million last month, and the average estimate for new-crop stocks is 983 million bu., up from 970 million a month ago.

Wheat: futures are under pressure from no change in weekly winter wheat crop conditions this past week when most were looking for a small decline. Spring wheat conditions slipped from very high marks a week ago.  The average guess for U.S. all wheat production is 1.889 billion bu., down from 1.897 billion estimated in May.   Egypt is tendering for unspecified soft and milling wheat today with the lowest bids coming from Russia with additional details still to come.

Livestock Calls:

Cattle:  Steady-firm

Hogs: Steady-firm

Cattle: Futures seen building on strong gain Monday when prices rose on easing trade tensions with Mexico. Traders are also taking note of the $4-plus discount June live cattle hold to last week’s average cash price of $113.76. Boxed beef prices were mixed on Monday with Choice down 65 cents but Select rose $1.87 and sales were light.

Hogs: Futures seen trying to build Monday’s trade-related rally. U.S. Meat Export Federation President and CEO Dan Halstrom says the “lifting of Mexico’s retaliatory duties was the most welcome news the U.S. pork industry has received in a long time.” However, the retaliatory duties from China continue to put U.S. pork at a “significant disadvantage in China. Rallies also constrained by a drop in the national average cash prices on Monday, down 62 cents to $75.27. Fresh pork cutout values rose 98 cents, but sales were very slow, especially with slaughter up 33,000 head from a year ago on Monday.

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