Ahead of the Open: Grains, Soy Firmer but Waiting on USDA Crop Report

Posted on 09/12/2019 8:00 AM

Grain Calls

Corn: Steady to up 2 cents
Soybeans: Up 6 to 9 cents
Wheat: Steady to up 1 cent

General Comment: Corn and soybean futures are moving slightly higher in quiet trading amid signs of thawing U.S./China trade tensions and the European Central Bank offering new stimulate measures to spur economic growth. Buying is restrained ahead of the USDA’s first field-based crop production estimates later this morning.  Traders are looking for smaller corn and soybean crop forecasts after the agency sprung a surprise last month with higher-than-expected yield forecasts.

U.S. weather leans negative with warmer temperatures and rain across the Midwest the next 10 days and colder forecasts past September 24 are no longer showing up on the long-range maps for the northern Midwest. However, dry weather continues at least another two weeks in parts of Brazil and Argentina and that may provide some light support.

U.S. President Donald Trump on Wednesday welcomed China's decision to exempt some U.S. anti-cancer drugs and other goods from its tariffs and announced a short delay to scheduled tariff hikes on billions worth of Chinese goods.

Trump wrote in a post on Twitter that the United States had agreed to delay increasing tariffs on $250 billion worth of Chinese imports from Oct. 1 to Oct. 15 "as a gesture of good will." The tariffs were set to increase to 30% from 25% on the goods. China's decision to exempt some U.S. goods was a "big move" by Beijing and a positive gesture before trade negotiators from both countries meet in Washington, Trump told reporters at the White House. Deputy trade negotiators are due to meet in Washington in mid-September, with minister-level talks to follow in October. Exact dates for the meetings have not been released.  

China said on Thursday that Chinese companies have started to inquire about prices for U.S. agricultural goods purchases, in a further sign of a potential de-escalation in a bitter trade war between the two countries. Speaking at a weekly news briefing in Beijing, Chinese Commerce Ministry spokesman Gao Feng said China welcomed the U.S. move to delay raising tariffs in October. Possible purchases of U.S. farm goods included pork and soybeans, Gao said, both of which are still subject to hefty Chinese duties.

China on Thursday said it was expecting lower soybean imports for 2019-20 from an estimate released last month, due to Sino-U.S. trade war and higher domestic output. Soybean imports for the year are now seen at 84 million metric tons (MMT), down 900,000 MT from last month's forecast, and up from 83.5 MMT last season, the Ministry of Agriculture and Rural Affairs said in its monthly crop report. USDA forecast 85 MMT last month and will update its forecast later this morning. China corn consumption for feed in 2018/19 was seen at 174 MMT, down 2 MMT from the previous month's estimates, due to a larger-than-expected fall in pig and sow herds, according to the monthly Chinese Agricultural Supply and Demand Estimates. The ministry reported last month that the world's largest pig herd shrank by 32.2% in July from the same month a year ago, while the number of sows declined by 31.9%, as African swine fever continued to spread through the country.

Taiwan will sign a letter of intent (LOI) to buy $3.6 billion of U.S. grain and meat in Washington next week, the South China Morning Post reports, citing the island’s Deputy Minister of Agriculture Chen Junne-jih. The farm products include soybeans, corn, wheat and meat products.

Today’s weekly export sales report showed wheat and corn sales just above the top end of trade estimates, but corn fell below trade forecasts. USDA reported 610,900 MT of wheat sold for export last week, up 20% from the prior four-week average. Soybean sales for the 2019-20 season were 1.172 MMT with Mexico buying more than half of the total. Corn sales were 498,100 MT last week.

USDA’s daily export sales reporting service announced that private exporters sold 113,036 MT of corn for delivery to Mexico during the 2019-20 marketing year.  

Corn: Futures are firmer but waiting for USDA crop production forecast this morning. White House officials pressured biofuel companies in a Wednesday meeting to take a deal    
that lifts biofuel blending mandates, Reuters reports, citing three sources familiar with the discussions. 

Soybeans: Soybeans and soymeal futures need to close above the August highs to improve the overall chart picture and that will depend on the USDA yield and production forecasts later this morning amid hopes for better Chinese purchases ahead of trade talks next month.  

Wheat: Futures are trying to find a seasonal low and the USDA world forecasts will be closely scrutinized later this morning.  Soil conditions are much too dry in western Argentina. The dryness is in both the top and subsoil extending from Santiago del Estero through Cordoba and San Luis to La Pampa and western Buenos Aires. Some areas in Chaco, Formosa and western Santa Fe are also dry, but not as extreme as areas farther to the west and south. The lack of moisture will also leave wheat poorly established in many areas and its development will be on hold until greater rain falls. Better weekly exports may lend light support in early trading.

Livestock Calls

Cattle: Steady to lower
Hogs: Steady to firmer

Cattle: Cattle futures steady to weaker after two strong closes. Choice boxed beef prices plunged $5.49 and Select fell $2.58 Wednesday. Given the continued plunge in wholesale beef prices, packers are seeking to buy cattle at lower prices again this week. But with marketings current and live cattle futures up sharply the past two days, feedlots may opt to hold out on selling cattle if packers won’t pay at least steady prices this week. USDA said export sales of beef were 18,000 MT, unchanged from the prior week but up 11% from the four-week average. Hong Kong bought 11,1000 MT last week. Shipments fell 7 % below the prior four-week average.

Hogs: Look for firmer start this morning amid indications China may begin larger imports of U.S. pork products. Weekly export sales showed 21,900 MT of pork sold last week, up 24% from the prior week with China buying 10,900 MT. Shipments fell 14% from the prior week with Mexico and China the top two destinations. Cash hogs fell another $1.50 yesterday but wholesale pork prices inched up 46 cents. Slaughter is 115,000 head greater than a year ago so far this week and may be reaching its seasonal peak.

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