Ahead of the Open: Harvest Pressure, China Disappointment to Weigh

Posted on 09/17/2018 8:23 AM

Grain Calls 

Corn:  Down 1-2 cents

Soybeans: Down 3-5 cents

Wheat: Mixed

General Comment: U.S.-China trade talks could be over before they begin. China is considering declining the offer for new talks, according to the Wall Street Journal, after President Donald Trump told aides on Thursday to with tariffs on about $200 billion more in China imports. The disunity within the U.S. administration over the approach to China means there’s a lack of confidence in Beijing over whether any trade deal would be honored. Stock market in Shanghai closed at the lowest levels in almost four years today. The off-again, on-again Nafta talks between the U.S. and Canada are set to resume this week, with Thursday now seen as the deadline for an agreement which could be formalized by the end of the month. The U.S. already dropped some of its most high-profile demands amid opposition from Congress to a Mexico-only deal and mounting pressure ahead of the midterm elections.

Corn futures are likely to remain under pressure to start this week as harvest moves forward for what is projected to be the second-largest U.S. crop. Some rains will begin to slow collection later this week across western belt. Funds increased short positions last week after the USDA surprised the trade with a record yield forecast on Sept. 12.  This morning, prices are just above the contract lows hit last week.

Soybeans market seen opening just above the contract lows set Sept. 12 as market prepares for new U.S. tariffs on China imports as early as this week. Demand is perking up. This morning, USDA announced private exporters sold 241,000 metric tons of soybeans to unknown destinations for delivery this marketing year. Monthly soybean crush report for August is expected to show a record 163.87 million bushels used last month when the National Oilseed Processors Association reports later this morning.  Funds continue to add to short positions after USDA forecasts record U.S. and global carryover last week.

Wheat futures seen mixed to start but may turn higher on some follow through strength after Friday’s rally when Russia’s food safety watchdog Rosselkhoznadzor said it had ramped up quality controls on grain exports due to complaints from major buyers and the lower quality of the crop. Traders are speculating if this was an informal method of curbing exports. U.S. wheat is competitively-priced on the world market, but new export sales needed to confirm global interest is improving. Saudi Arabia bought 630,000 MT of wheat from optional origin sources. Australian wheat areas will remain dry over the next ten days after a damaging frost during the weekend. Europe is expected to remain unfavorable dry the next 10 days for winter grain planting. Russia may get some more rain after showers on Sunday provided some moisture relief for winter sowing.  

Livestock Calls

Cattle: Steady to firmer

Hogs: Steady to firmer

Cattle seen opening higher on a continuation of the strong close on Friday. Price gains may be limited early in the week to see if the cash trade can build on the late Friday jump in bids. Firmer wholesale beef prices will be needed this week to sustain the recent futures rally.

Hogs seen steady to firm after the value of a wholesale pork carcass jumped $3.48 to the highest since July 30 on Friday. Average cash hogs slipped 30 cents on Friday even as slaughter rates fell with the flooding in North Carolina curbed production. China’s ag ministry reported another outbreak of African swine fever in its Inner Mongolia region during the weekend. The virus continues to spread across China, despite tighter restrictions on trade, live markets and feed usage. Our sources signal the virus is substantially more widespread than what’s being officially reported and may lead to large pork imports. Meanwhile, Chinese chicken prices are climbing thanks to the outbreak as consumers look for alternative sources of protein.

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