Ahead of the Open: Grains Weak, Soy Firm With Possible China Trade Deal ahead of Nov. 8 USDA Reports

Posted on 11/04/2019 7:50 AM

Grain Calls

Corn: Down 3 to 4 cents
Soybeans: Up 1 to 2 cents
Wheat: Down 3 to 6 cents.

General Comment:  Grains seen weaker and soybeans may rise slightly. U.S. weather looks fairly

clear for harvest this week for improving harvest progress. The corn market is under pressure after commodity brokerage INTL FCStone Friday raised its estimate of the average U.S. 2019 corn yield to 170.0 bushels per acre, from 169.3 bu. in its previous monthly report released on Oct. 1.The firm raised its corn production forecast to 13.911 billion bushels from 13.887 billion previously. The company forecast U.S. soybean production at 3.593 billion bushels, down from 3.648 billion previously, and lowered its soybean yield estimate to 47.5 bu. per acre. Wire services will be out with full surveys later today ahead of the USDA Crop Production and WASDE reports on Nov. 8. We should see more three quarters of U.S. beans harvested on Monday night’s USDA harvest progress, and just over half of the U.S. corn collected.

Weather leans negative in South America with better precipitation forecast the next two weeks but delays already raising concerns. Brazilian producers have now panted 46.9% of their intended soybean area, well under last year when 61.6% of the crop was seeded and a bit behind 29.2% for the five-year average, according to the agribusiness consultancy Arc Mercosul. Slow planting due to dry conditions is raising concern about timely planting of the country’s second corn crop. Antonio Galvan, head of the Mato Grosso state grain growers’ association, told Reuters this means that rains must last through the end of April for Brazil to produce a solid safrinha corn crop.

Speculators last week marked their seventh straight week of covering short positions in soybeans as top soybean buyer China continues to be active in the U.S. market despite the lack of a firm trade agreement. In the week ended Oct. 29, hedge funds and other money managers increased their net long in CBOT soybean futures and options to 72,325 contracts from 68,822 in the previous week, according to data from the U.S. Commodity Futures Trading Commission. But speculators feel much differently about corn than soybeans. In the week ended Oct. 29, money managers boosted their net short in CBOT corn futures and options to 85,337 contracts from 76,055 a week earlier. Money managers cut their net long in SRW wheat futures and options to 5,042 contracts from 12,099 in the previous week, though funds were light buyers of the grain late last week. Through Oct. 29, money managers boosted their net short in HRW wheat futures and options to 29,389 contracts from 25,871 in the previous week. They also expanded bearish bets in spring wheat futures and options to 9,362 contracts from 8,062 a week earlier.

Futures for Wall Street’s main stock indexes were higher, reflecting a rise in global equities, on signs that the U.S. and China could soon reach a trade deal. The dollar rose against a basket of major currencies. Oil was up on trade optimism, while spot gold prices were in the negative territory.

The United States and China have reached consensus after talks between their main trade negotiators on Friday, both the U.S. Trade Representative’s office and Beijing's state-media Xinhua News Agency reported last Friday. Commerce Secretary Wilbur Ross was optimistic the U.S. would reach a Phase 1 trade deal with China this month and said licenses would be coming “very shortly” for American companies to sell components to Huawei Technologies Co., adding that the government received 260 requests. “You won’t have a deal on anything until you have a deal on everything,” Ross told the Financial Times in Bangkok. “But we are quite optimistic that the remaining issues for the Phase 1 can be closed out.” Ross said Iowa, Alaska, Hawaii and locations in China are all possible places for Donald Trump and Xi Jinping to sign the deal after the cancellation of this month’s Asia-Pacific Economic Cooperation (APEC) summit in Chile due to unrest in the country. President Trump also mentioned the possibility of Iowa for the meeting in remarks on Friday — Trump reportedly wants to make sure the signing takes place in the U.S. Some are worried this push for a quick signing in the U.S. will hurt the U.S. negotiating power for a significant deal.

USDA daily export sales reporting services said private exporters did not report any new large sales.

Corn: December corn opened lower and are sitting just above short-term support at $3.84 ¾. Look for stronger support at $3.82 and $3.78 ¼ this week.

SoybeansJanuary beans also opened lower last night but are trading fractionally higher this morning near $9.38, more than 13 cents above key short-term support at $9.25.  Last month’s double top near $9.60 remains key resistance. Soybean deliveries against the expiring November futures totaled 220 today and all were stopped by JP Morgan for a customer account that many believe is Cargill. Cargill has not stopped all of 1,659 contracts delivered on first notice day last Thursday That’s a positive development and underscores rising demand and strengthening cash basis levels.

Wheat: Futures followed corn lower this morning, after a strong late-week rally Thursday and Friday off key support failed to generate much new buying last night.   

Livestock Calls
Cattle: Steady to higher
Hogs: Steady to weak

Cattle: Live cattle futures prices all closed higher and near weekly highs on Friday but remain severely overbought and ripe for a correction after funds added 9,253 contracts to boost their net-long position to 40,467 futures and options as of Oct. 29.  Boxed beef cutout values were higher on moderate to good demand and offerings, support both packer bids and futures. The Choice cutout increased $1.02 on Friday to $233.20 per cwt, up $7.76 last week.  Select cutout also increased $1.02 on Friday to $207.51, and up $7.67 last week. Packer beef margins for the week were a positive $310.28 per head, versus a positive $257.27 the week before, according to HedgersEdge.com. This was the seventh week in the last 11 weeks that margins exceeded $300 per head.

Hogs: Futures are set to followthrough on last week’s declines, testing the October price lows early this week. If those lows hold, it would be a positive signal. Pork margins were positive by $45.50 per head, versus a positive $34.88 per head the week before. This was their highest weekly level of the year. The average national hog prices fell $4.17 last week to $48.95 while the pork cutout value fell to $75.64, down 92 cents last week. Slaughter last week slipped 33,000 head from a week earlier but remained 130,000 head larger than a year earlier. Cash hog tend to seasonally bottom in early November and the smaller slaughter last week may be the start of the bottoming.

Add new comment