Ahead of the Open: Grains, Soy Firming Ahead of This Morning's USDA Barrage of Reports

Posted on 02/08/2019 7:48 AM

Grain Calls

Corn:  Up 1 to 2 cents
Soybeans: up 1 to 2 cents
Wheat:  Up 2 to 5 cents

General Comment: The fireworks begin at 11 a.m. central time when USDA will publish its monthly supply and demand outlook, which will include postponed reports from January. Final U.S. corn and soybean production, U.S. winter wheat seedings, and Dec. 1 grain stocks had been expected on Jan. 11. The numbers could be overshadowed by new trader pessimism surrounding the ongoing U.S./China trade talks. Markets were disappointed to find out on Thursday that Presidents Donald Trump and Xi Jinping would not meet in person as was expected after last week’s talks in Washington. U.S. top trade negotiators travel to Beijing next week to reach a deal prior to the U.S.-imposed March 1 deadline for increasing tariffs. Reuters reports that Trump advisers are concerned that accepting a meeting invitation now would raise expectations for a quick deal between the two countries and reduce U.S. leverage in the talks.

The USDA on Friday did not confirm any additional Chinese soybean purchases. Between Monday and Wednesday, the agency announced sales totaling 3.8 million metric tons (MMT) to China, and 98% of those were for delivery in 2018-19. Another 456,000 MT were reported sold to unknown destinations for delivery this season.  

Brazil’s weather forecast calls for near-normal rain for much of the nation the next two weeks, with some of the driest areas of the past two months likely to get the greatest precipitation. In Argentina rain through the weekend will maintain favorable soil moisture and will be followed by a week of dry and cool weather.  

Corn is seen starting a little better, clawing back a portion of Thursday’s large losses that were accompanied by a big increase in open interest. The market turned bearish ahead of what should be a set of bullish USDA numbers later this morning from USDA.

Soybeans seen slightly better, correcting some of the steep losses yesterday that were also accompanied by a big increase in open interest. USDA data is expected to be neutral to bearish. That means the outcome of trade talks next week in Beijing will set the tone.  

Wheat prices seen higher with prices bouncing off short-term support ahead of the USDA reports and tightening global supplies that should improve demand for U.S. wheat in the next two months.  Both European and Black Sea wheat prices rebounded from two-month lows today. The lowest offer presented at an Egyptian state purchase tender on Friday was $235 per MT for 60,000 MT of U.S. soft red wheat on a free on board (FOB) basis. Results are expected later today and will likely go to France or eastern Europe origins because of higher U.S. freight costs. France exported 1.4 MMT of soft wheat in December, including 882,000 MT shipped outside the European Union, including 131,000 MT exported to China. Sales were the highest four months and French cumulative exports for the season up 3% from a year ago. Russia’s agriculture ministry said on Friday it plans to hold the next regular meeting with the country's grain exporters on Feb. 11 to check on prices and supplies.

Livestock Calls

Cattle: Steady to weak

Hogs: Weaker

Cattle futures seen steady to weaker, following the declines in wholesale beef prices on Thursday. Choice fell 86 cents and Select declined 84 cents on moderately active sales. Choice tends to build a premium on Select beginning by late February. Look for stronger choice demand to trigger the next rally in futures. Most deliveries have not been retendered and that suggests this week’s cash market will be higher when trading finally develops today.

Hog futures seen weaker to start in follow-through selling to Thursday’s defensive close. National average cash hogs fell 23 cents Thursday while Iowa/Minnesota prices fell 84 cents. Wholesale pork carcass values slumped 44 cents on Thursday to the lowest since Aug. 29. Weakness continued to be led by sharp losses in bellies after showing signs of bottoming during the past week. The market continues to be pressured by larger slaughter than expected and uncertainty when China may lift tariffs on U.S. pork imports.

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