Ahead of the Open: Grains Mixed on Trade Deal Delay; Hogs Up on China Pork Buying

Posted on 03/14/2019 7:59 AM

Grain Calls

Corn: Steady to mixed

Soybeans: Steady to down 2 cents

Wheat: Steady to mixed

General Comment:  Soybeans turned lower this morning and grains gave back overnight gains after President Donald Trump said he was in 'no rush' to reach deal might walk if the deal is not a good one for the U.S. “I think things are going along very well — we’ll just see what the date is,” Trump said at the White House. Indications are that China would like to see the deal completed before Trump and Xi meet to finalize it. But Trump said that does not have to be the case. “We could do it either way," he remarked, adding that he would prefer to "get the deal almost completed and negotiate some of the final points.” Meanwhile, Bloomberg is reporting that unnamed sources say any such meeting won’t occur until April at the earliest. It looks like both sides now want to have all the specifics of a trade deal done before Trump meets with China President Xi Jinping.The issue of trade is not just a China story as the U.S., Mexico and Canada trade deal is not signed and the U.S. is just beginning talks with Europe and Japan.

The dollar rose overnight in part because of a delay in completing a U.S/China trade deal amid signs of slowing world growth. Chinese industrial output growth fell to a 17-year low in the first two months of 2019. The stronger dollar added to negative grain market sentiment Thursday. 
USDA’s daily export sales reporting services said no large sales were reported in the past 24 hours, a small disappointment with some looking for additional soy sales to China or some of the rumor corn buying yesterday.  

Corn market are seen steady to weak amid slow exports and the China trade deal delay after rumors yesterday of China shopping for U.S. corn.  This morning’s weekly USDA export sales report showed exporters sold just 372,000 MT of corn in the week ended March 7, well below the 800,000 to 1.2 MMT expected last week.  South Korea's Korea Corn Processing Industry Association (KOCOPIA) purchased about 60,000 MT of U.S. corn on Wednesday, Reuters reports. The deal continued a busy period of Korean corn purchasing of optional origin supplies after Chicago corn futures fell. KOCOPIA itself had purchased 60,000 MT last week.  The German corn crop will increase by 27% to 4.25 MMT, the German association of farm cooperatives said on Thursday in its first forecast for the new crop.  Analysts ProAgro expect Ukraine’s 2019 corn crop to drop a notable 4.4 MMT from 2018 levels to 31.2 MMT.

Soybean futures seen lower on China trade deal delays. Soybeans export sales in the week ended March 7 rose to 1.912 MMT, topping estimates for 1.2 to 1.9 MMT last week. China bought 1.708 MMT last week. Malaysian palm oil futures fell for a seventh consecutive session on Thursday to a three-month low, as concerns over slowing demand and rising production dragged down the market. Global palm oil demand may suffer its first contraction in two decades during the 2019/20 crop year due to rising domestic oilseed supplies in top buyer India and slowing demand in Europe and China.  the most-active soyoil contract on the Dalian Commodity Exchange fell 1.4 percent.

Wheat futures are seen steady to slightly higher in a continue bounce from the 14-month lows hit earlier this week. Buying remains tepid with world crop forecasts rising.  USDA this morning reported sales last week were just 263,000 MT, well below trade estimates for 400,000 to 600,000 MT of new business. Germany's 2019 wheat harvest will rise by 19.4% to 24.20 MMT from last year’s drought-reduced crop, the German association of farm cooperatives said on Thursday in its first forecast for the new crop. French consultant Strategie Grains trimmed its EU wheat crop forecast to 146.1 MMT today, down form 146.4 MMT last month but still up 15% from 127 MMT harvest last year.  Ukraine will likely produce a 28.3 MMT wheat crop in 2019, according to the analysts ProAgro. This is up 700,000 MT from its previous estimate.  Algeria purchased 450,000 MT of wheat from optional origins; France likely got the bulk of the business. Turkey tenders for 290,000 MT of milling wheat but no purchases have been made.

Livestock Calls:

Cattle: Steady to lower

Hogs: Higher

Cattle futures seen steady to lower amid further consolidation of new highs set last week. Cash cattle traded about 50 cents lower Wednesday. Wholesale beef prices were mixed Wednesday with Choice up another 2 cents extending the rally to the highest since May while Select was down $1.07. Sales improved but remained generally sluggish. USDA said this morning that export sales slowed to 12,800 MT in the week ended March 7. Slaughter gains from a year ago slowed on Wednesday and not stand 3,000 head above a year earlier.   Much of the central U.S. received rain and snow over the last 24 hours, accompanied by high winds in the Plains. The blizzard ends today in the Dakotas and Minnesota, so it will be a while before muddy feedlots firm up and cattle performance improves.

Hog futures seen opening higher on strong export demand. This morning’s weekly USDA export sales report provided a positive demand surprise. USDA said 50,300 MT of pork were sold in the week ended March 7. More important, China bought 23,800 MT last week and shipped 3,400 MT. The national average cash price rose 89 cents on Wednesday, that follows a surge of $2.42 on Tuesday. Fresh pork carcass values rose 23 cents yesterday, reaching the highest since Feb. 4 and up from $59.01 on Feb. 22. The pace of slaughter is slowing, up 2.3% this week, that down from more than 5% the past two months.

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