Ahead of the Open: Exports Support Wheat, Soy But Weigh on Corn, Hogs

Posted on 04/04/2019 7:58 AM

Grain Calls

Corn: Steady up 1 cent

Soybeans: Up 1 to 3 cents

Wheat: Up 3 to 5 cents

General Comment: Grain and soy futures rose slightly overnight in very light volume with few fresh market news inputs. Markets continue to recover from last Friday’s set of bearish USDA inventory numbers. This morning’s weekly exports sales are positive for soybeans and wheat and may curb buying in the corn market.

Negotiators from the U.S. and China are crafting a deal that would give Beijing until 2025 to meet commitments on commodity purchases and allow U.S. companies to wholly own enterprises in China. Later today Chinese Vice Premier Liu He will meet with President Donald Trump in the White House, with the goal over the next few days to reach an agreement on core issues which would allow a signing ceremony between Trump and China’s Xi Jinping. The biggest remaining issue appears to be the U.S. demand that U.S. tariffs remain on Chinese products to ensure Beijing enacts reforms agreed to in any overall accord, and that China agree to a no-retaliation clause in a trade deal should U.S. tariffs be re-imposed due to China not living up to agreement provisions. Chinese negotiators want the U.S. to completely lift tariffs. President Trump tweeted this morning: “Despite the unnecessary and destructive actions taken by the Fed, the Economy is looking very strong, the China and USMCA deals are moving along nicely, there is little or no Inflation, and USA optimism is very high!”

A stormy period ahead for the central U.S. for at least two more weeks larger systems pass through key areas, producing widespread coverage of near- and above-normal rainfall. Above-normal April rains would mark the 9th straight month of above-normal precipitation in the Corn Belt for the first time in 125 years of data. It also will be the wettest June-April period since at least 1895.  Temperatures will be very mild through Tuesday, then cool next week, not ideal for Midwest seeding progress.

USDA did not report any large new daily sales this morning.  

Corn market is seen further consolidating sharp losses sustained last Friday when USDA surprised the market with a March 1 inventory estimates that was 270 million bu. larger than expected. Wet weather continues to provide underlying support along with optimism for a U.S./China trade accord to results in large new purchase commitments for corn and products. The weekly USDA export sales report this morning was a bearish surprise. Private exports sold just 537,300 metric tons (MT) in the week ended March 28, down 31% from the prior four-week average and well below trade guess for new sales of 700,000 MT to 1.1 MMT

Soybean futures are supported by better demand. USDA weekly exports ales report showed 1.971 MMT sold last week, with China taking 1.7 MMT, most was already reported in the daily sales report of large new sales. Still, it topped the range of trade estimates. Soybean meal sales rose 19% to 190,300 MT, above the prior 4-week average but did not reach the 300,000 some expected.

Wheat futures are higher on concerns about too much rain in the SRW production region. There remain some dry pockets in parts of Europe and the Black Sea regions that traders are tracking. Today’s weekly export sales report was a positive surprise. Private exporters sold 704,700 MT last week, up 70% from the prior 4-week average and above trade estimates. New-crop sales were a solid 312,800 MT with the Philippines and Iraq the main buyers. USDA attaché in India calling wheat production to rise to 100 MMT this year, a third straight record crop despite signs of a strengthening El Nino that could reduce monsoon rainfall.  

Livestock Calls:

Cattle: Steady to firm

Hogs: Steady

Cattle futures seen steady to firm after a second straight session of firming beef prices and solid new sales. Choice cutout values rose 41 cents and Select gained 48 cents on Wednesday. Packers are bidding lower this week and have bought only few animals with most feedlots holding out for at least steady money. Weekly beef sales rose 58% to 20,500 MT from a week earlier and 18% above the 4-week average.

Hog futures seen steady after the weekly export sales report showed no new pork sales to China. Total sales fell 66% from the prior four-week average to just 10,800 MT, USDA said this morning. Shipments remains strong at 27,200 MT with Mexico and China the top two destinations.  The national average cash hog prices rose 61 cents to $75.89 but the pork cutout values fell $1.45 to $80.26. Losses in hams and loins and overall slow new pork business Wednesday will insert some caution today. Also, slaughter is on the rise again this week after slowing last week.  China’s ag ministry today reported a new case of African swine fever (ASF) in the southwest province of Yunnan. Brazil plans to be a major competitor for Chinese pork imports, according to food producer BRF CEO Pedro Parente. But he said there is plenty of room for multiple suppliers to make up for lost production to AFS.

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