Ahead of the Open: Grains, Soy Bouncing After Recent Weakness Ahead of Key USDA Reports Friday

Posted on 06/27/2019 7:58 AM

GRAIN CALLS:

Corn: Steady to up 1 cent
Soybeans: Steady to up 2 cents
Wheat: Up 5 to 8 cents

General Comment: Corn, soybean and wheat prices are steady to firmer, but volume is light overnight, and trading will be cautious today ahead of first notice day against July futures and USDA’s seedings and quarterly stocks report on Friday.

The weather pattern is changing with high pressure building in central U.S. that brings cooler, wetter weather to the Pacific Northwest, Northern Plains and parts of the Canadian Prairies with warmer, drier in the Midwest. Yesterday was the first day since June 8 that U.S. corn production averaged warmer than normal. A steady flow of Gulf moisture will combine with soil evaporation to trigger showers and thunderstorms in the central U.S. But the pattern may not last past the first third of July. Warmer Pacific Ocean temperatures should make it difficult to have a hot, dry July. The crops need warmer temperatures to speed development and reach maturity before the first freezes. The pattern also ushered warmer, drier weather into Europe and parts of the Black Sea but may break by next week.

 Uncertainty and divergent opinions are rising ahead of Saturday's meeting between Presidents Donald Trump and Xi Jinping on the sidelines of the G20 meetings in Japan.  Bloomberg's latest assessment: “Optimism is growing that President Donald Trump and China’s Xi Jinping will announce a new round of trade talks after their meeting at the G20 on Saturday.” Xi reportedly plans to issue a set of preconditions that the U.S. must meet before Beijing would sign a deal, the Wall Street Journal reports, citing unnamed sources. They include calling off the Huawei ban, lifting all punitive tariffs and dropping demands that China buy even more U.S. goods than it said it would in early talks. Meanwhile, the New York Times predicts the ideological fight between Washington and Beijing could last a long time. The South China Morning Post reports that the U.S. and China have tentatively agreed to another truce in their trade war and resume talks aimed at resolving the dispute.  Details of the agreement are being laid out in press releases in advance of the meeting Saturday between Trump and Xi, according to the newspaper.

China, India, the European Union, Ukraine and Australia told the World Trade Organization on Wednesday that U.S. farm subsidies risked distorting global markets, and said they feared such funding would be repeated. Many countries also raised concerns about the EU's proposed handling of agricultural tariff rate quotas under a no-deal Brexit, fearing they would lose market share if Britain started competing as an exporter to the bloc.

A gauge of economic confidence in the euro-area dropped to the lowest level in nearly three years, with the decline primarily driven by industry malaise. The data adds to fears that the region’s manufacturing slowdown will start to dominate the whole economy. It will also do nothing to change the minds of economists who now see the European Central Bank cutting interest rates at its September meeting, with analysts split on whether QE will be resumed. Markets are also looking for the U.S. Federal Reserve to cut rates next month at its next meeting to stave off recession A little-noticed government report was pessimistic about the future health of the U.S. economy. A new study from the Congressional Budget Office concludes the national debt will almost triple as a share of the total economy by 2049.

USDA daily export reporting service reported no new larger sales by  private exporters this morning.

Corn:  Futures are expected steady to slightly higher after the recent setback on improved weather. Today’s weekly export sales report for the week ended June 20 showed 294,900 metric tons (MT) sold for delivery before Sept. 1. New-crop sales remained slow at just 110,100 MT. Both were at the low end of reduced expectations.


Soybeans: Soybeans are seen slightly higher after recent declines. Today’s export sales tally of 168,200 MT for old crop were below trade estimates, and 319,600 MT sold for new crop topped forecasts. China bought both old- and new-crop supplies but also decreased some prior old-crop sales. China was the main destination for shipments last week. Soymeal exports ales fell to a marketing-year low last week at 28,700 MT, down 78% from the four-week average.

Wheat: Winter and spring wheat futures are posting gains ranging from 5 to 8 cents thanks to some global weather concerns and smaller Canadian wheat plantings than anticipated. Weekly export sales topped trade estimates at 612,000 MT.

LIVESTOCK CALLS:

Cattle: Steady to firm
Hogs: Steady to weak

Cattle: Live cattle will continue to build on recent stability after Iowa/Minnesota saw some additional cash cattle trade around the $112 mark yesterday, up $4 from an early week test and in line with week-ago levels. Steady cash action this week would be a welcome sign of stabilization after cash prices marched steadily lower over the past month.  Wholesale beef prices wee mixed on Wednesday with solid sales activity. Choice beef cutout values rose 6 cents and Select fell 39 cents. Marketing are very current, and packers may need to bid higher to get animals for next week’s holiday-shortened week. Weekly export sales fell 17% below the four-week average last week and shipments were down 3% from the four-week average.  

Hogs: Futures seen steady to lower amid weaker cash markets and lower pork. The average cash hog prices fell another $1.39 on Wednesday and the pork cutout values dropped $1.61 on very slow sales. Today’s USDA export sales report showed new sales rose 51% from last week’s low total but was still 9% below the four-week average. Shipments jumped 14% above the 4-week average with Mexico and China taking more than half the weekly total. The record-setting slaughter numbers this month continue to pressure cash markets and increase uncertainty what USDA will say in its Quarterly Hogs & Pigs Report after markets close today. Analysts polled by Reuters are expecting a 3% increased in all hogs and pigs from a year earlier. USDA may also need to make some big revisions to past data because of the big slaughter rates this month. China says it will provide additional incentives to encourage hog production and stabilize prices, official media reported. Local government will provide incentives and preferential loans and subsidies to boost production. China pork prices are 29.3% higher than year-ago and the agriculture ministry predicts as much as a 70% surge in prices this year as African swine fever shrinks China’s hog herd.

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