Ahead of the Open: Firmer Start to the Week for Grain, Soy Futures

Posted on 05/20/2019 7:56 AM

Grain Calls

Corn: 4 to 6 cents higher
Soybeans: 10 to 13 cents higher
Wheat: 12 to 18 cents higher



General Comment: Last Friday, President Donald Trump announced he is lifting tariffs on steel and aluminum imports from Canada and Mexico, which should help get the U.S.-Mexico-Canada Agreement ratified in all three countries. Trump also delayed auto tariffs on imports from Europe and Japan for 180 days. These actions allow Trump and his top trade officials to focus on pushing China to agree to U.S. trade terms, as well as pressure Europe and Japan to reach a trade deal before the 2020 election. But it looks like Chinese leaders are betting on a protracted trade war with the United States.


World stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. Markets are not reacting much to a threatening tweet President Trump made to Iran over the weekend, warning Iran not to threaten the United States or there would be actions. A U.S. naval task force has been deployed to the Persian Gulf recently.


Corn: Corn futures are trading at 11-month highs on the weekly continuation chart amid support from weather.  Frequent rains are likely for the Midwest over the next week to 10 days, with western and northern areas expected to be the wettest. Corn planting progress as of Sunday is expected to be no more than half complete in USDA’s update this afternoon. As a result, traders are factoring in more potential acreage and yield reductions and funds are covering short positions. In the week ended May 14, money managers added to their aggressive net short position in corn futures and options, pushing it 591 contracts higher to 282,918 contracts. Funds aggressively trimmed shorts the last three days last week, but are still heavily short the market.


Soybeans: Futures rallied overnight despite the ongoing trade war with China and prospects for some corn acres switching to soybeans. Funds are covering short positions. Funds added 8,283 contracts to their net short soybean position that was a record-large 168,835 futures and options contracts as of May 14. Soybean planting progress will remain severely behind normal in this afternoon’s update.


Wheat: Weather is also supportive for the wheat market to open the week. Flash flood watches are in effect for much of Kansas and Oklahoma today after a weekend of extreme weather and heavy rainfall.  The National Weather Service has also issued frost advisories for North Dakota, much of Minnesota and northern South Dakota. Meanwhile, SRW wheat country continues to deal with soggy soils and poor crop conditions. There are reports of producers abandoning SRW wheat acres.




Livestock Calls:


Cattle:  Steady to higher

Hogs: Steady to higher


Cattle: Cattle futures are expected to open the week with a firmer tone. Traders should be looking to narrow the discount summer-month futures hold to the cash market. But buyer interest is likely to be light until the cash and product markets bottom. The product market likely needs to stabilize before the cash market turns higher. There were signs of that Friday, as Choice beef prices firmed 75 cents and Select was up 40 cents.    


Hogs: Hog futures are also expected to open with a firmer tone amid corrective buying. Futures finished high-range the last four days last week, suggesting traders are interested in moving the market higher following the sharp pullback. But strength in the cash market is needed to support buying interest in futures. The average national direct cash hog bid firmed a dime Friday. Steady to firmer cash hog bids are expected this week, though packers will be buying for a holiday-shortened slaughter schedule next week due to the Memorial Day holiday.

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