Ahead of the Open: Holding Pattern Before USDA's Report Tomorrow, Weather Lends Support

Posted on 04/08/2019 7:53 AM

Grain Calls

Corn: Mixed to up 1 cent

Soybeans: Up 1 to 3 cents

Wheat: Down 1 to 4 cents

General Comment: Global stocks are soft this morning in quiet trading. But crude oil is rising near a new five-month high on rising military tensions in Libya. Gold is higher and the dollar is weaker. The Bloomberg Commodity Index gapped higher overnight and is helping to provide a floor under grain markets this morning.

Talks on a deal to end the U.S. trade war with China will continue this week with “a lot of teleconferencing” according to Larry Kudlow, President Donald Trump’s economic adviser. Chinese media are reporting that President Xi Jinping has called for an early conclusion to the negotiations, while citing progress made during Vice Premier Liu He’s visit to Washington last week. For the grain markets, the question hinges on when a deal will be signed, rather than if an agreement will be forged.

Meanwhile, more than six months after the United States, Mexico and Canada agreed a new deal to govern more than $1 trillion in regional trade, the chances of the countries ratifying the pact this year are receding. If ratification is delayed much longer, it could become hostage to electoral politics. The delay will continue to hang on rally attempts in the ag markets.  

Weather remains a threat to timely spring planting and cattle feedyards this week. A large and intense system unleashes a blizzard in parts of Iowa, Nebraska, Minnesota, South Dakota and Wisconsin from Wednesday through Thursday with snow totals reaching as much as 10 to 15 inches. Rain south of Interstate 80 will top 2.5 inches. The next storm systems arrives Saturday Sunday form the Delta and the southeastern third of the Midwest.  Major flooding continues on the James River in eastern South Dakota and in much of the Red River Valley as well as on the Mississippi River from the Iowa/Wisconsin border southward to near St. Louis. Flooding elsewhere on the river systems noted above varies from minor to moderate. Snow cover remains on the ground in northeastern North Dakota and northern

Minnesota as well as in southern Manitoba. That moisture will soon be released contributing to the runoff and flooding that will be impacting the Red River Basin of the North over the next few weeks.

USDA did not report any large new daily sales this morning.  

Corn market is seen quiet today with prices finding support from the weather. But USDA is expected to reduce its demand forecasts in Tuesday’s monthly supply and demand update after the March 1 inventories exceeded trade estimates by about 270 million bu. in the March 29 Quarterly Grain Stocks Report. Funds increase net-short position more than 43,000 contracts to 246,735 futures and options as of April 2, the most ever for this time of the year in response to the bearish March 1 inventory report. However, commercials reduced net-short or hedge positions to 26,354 contracts last week, and the most for this time of the year but down from the record small short hedge position two weeks ago.

Soybean futures seen firming after a Brazilian bridge in Para that offers as a main transportation artery for soybeans and corn has been damaged by a ship and will require months to repair. This will impact soybeans flowing north into the northern arc of export ports and may aid U.S. exports. Funds increased net-short holdings almost 23,000 contracts to 74,169 futures and options contracts as of April 2. While the position is smaller than the more than 90,000 contracts short on March 11, it remains the largest for this time of the year since data began in 2006. Producers hold a rare net-long positions of 6,876 futures and options contracts, the biggest long bet for this time of year.

Wheat futures are seen weaker on rains aiding the HRW crop and continue worries about increased supply and competition from Canada as farmer switch from planting canola to sowing more spring wheat this year. Funds cut net-short positions for a second straight week.

Livestock Calls:

Cattle: Steady to firm

Hogs: Steady to weak

Cattle futures seen firm ahead of a major winter storm this week. Wholesale beef prices extended weekly gains. Choice was up 19 cents to 226.93, capping an 89-cent gain for the week. Movement on Friday was moderately active. Cash steers averaged $124.43 on Friday, down from $126.34 a week earlier. As the U.S. cattle inventory continues its expansion, consumer demand is increasing at a steady clip, according to experts speaking at the Texas and Southwestern Cattle Raisers Association Convention in Fort Worth during the weekend.

Hog futures may pause after several contracts rose to new highs last week.  National hog prices slipped 69 cents on Friday to $75.79 but still up 90 cents last week after soaring $30.17 in March. The cutout values fell 38 cents on Friday, paring last week’s gain to 51 cents after jumping $20.84 in March. Slaughter last week was 2.458 million head, down from 2.504 a week earlier abut still up 125,000 head from a year earlier, USDA estimated. In the week ended April 2, funds increased net short positions to 36,791 futures and options contracts, up 12.591 contracts. That the biggest long bet since early December. China’s ag ministry today confirmed an outbreak of African swine fever (ASF) in the northwest Xinjiang region after reporting Sunday ASF spread to two counties and one district of the city of Linzhi in the Tibet Autonomous Region.  

Add new comment