Ahead of the Open: More Choppy Trade to Start November Ahead of Nov. 8 USDA Crop Report

Posted on 11/01/2019 5:03 AM

Grain Calls

Corn: Steady to down a penny
Soybeans: Up 1 to 4 cents
Wheat: Narrowly mixed

General Comment: Grains and soybeans are trying to stabilize after recent three-week price retreat. The corn and soybeans cash basis levels continue to improve amid tight farmer holding of smaller crops. The markets attention is now turning to the Nov. 8 USDA updates on crop size and world inventories. Price action will likely remain narrowly mixed with chart signals providing intraday price direction while fresh China trade talk headlines adding to choppy market direction.

The Thomson-Reuters Continuous Commodity Index closed October at the highest end of month level since March and is sharply higher this morning. That’s a positive signal of potential money flows into commodities, especially after the U.S. dollar Index fell the most in October since January 2018.

U.S. job growth slowed less than expected in October as the drag from a strike at General Motors was offset by gains elsewhere, while hiring in the prior two months was stronger than previously estimated, offering assurance that consumers would continue to prop up the slowing economy for a while, according to a report Friday morning. It also may help to put the U.S. in a stronger economic position to negotiate better terms in a new China trade deal.

USDA daily export sales reporting service said private exporters sold 132,000 metric tons of soybeans for delivery to China during the 2019-20 marketing year. The small sale will help to provide support to the soybean market. 
Rain and snow moved through the eastern Midwest the past 24 hours and is scattered in the Plains and western Midwest this morning. Those storms will bring additional moisture through the belt into Sunday. Another event arrives by middle of the next week with much lighter precipitation. The forecast is a little drier but cool, allowing for some improvement in this year’s slow harvest progress.

Weather leans a bit negative in South America after recent rains in southern Brazil and Argentina and more showers and rain expected for central Brazil the next several days. Drier weather returns into late next week before another round of showers. The next two rain events need to verify, or dryness risks may return.

The initial "phase one" trade pact with China appears to be in good shape and is likely to be signed around mid-November, although a finite date is still in question, U.S. Commerce Secretary Wilbur Ross said on Friday. "We're pretty comfortable that the phase one is in good shape," he told Fox Business Network in an interview

U.S. President Donald Trump said on Thursday the United States and China would soon announce a new site where he and Chinese President Xi Jinping will sign a "Phase One" trade deal after Chile canceled a planned summit set for mid-November. Trump offered no specifics on when a new meeting might be set but the White House said on Wednesday it expected to finalize a deal "within the same time frame." China's commerce ministry said in a statement on Thursday that bilateral talks will continue to proceed as previously planned and the lead trade negotiators from both countries will speak by telephone today. U.S. and Chinese negotiators have been racing to finalize a text of the "phase one" agreement for Trump and Xi to sign next month, a process clouded by wrangling over U.S. demands for a timetable of Chinese purchases of U.S. farm products.

China's yuan retreated on Friday after its strongest gain in nine months in October, weighed down by profit taking and renewed uncertainty over whether Beijing and Washington can reach a deal to end their protracted trade war. Market sentiment was dented by a Bloomberg report on Thursday which cited unnamed sources as saying Chinese officials have doubts about whether it is possible to reach a comprehensive long-term trade deal with Washington.

China’s ruling Communist Party signaled it is preparing to take a tougher approach toward pro-democracy protesters in Hong Kong, declaring Friday that it would strengthen ways to “safeguard national security” and step up efforts to make Hong Kong citizens more patriotic toward the mainland.

The warnings, coming at the end of a four-day party meeting in which the party leadership reiterated their loyalty to Chairman Xi Jinping and hailed his iron-fisted leadership, mark an escalation in Beijing’s potential actions to suppress the protests. The documents released after the secret meeting made no reference to the trade war which maintains doubts about the ability of the sides to reach a written deal that both sides can

Meanwhile, Mexico’s top North American negotiator upbeat on USMCA vote in House before Thanksgiving. Jesús Seade, after talking with House Speaker Nancy Pelosi (D-Calif.) and USTR Lighthizer says he’s optimistic the White House and lawmakers can reach an agreement on the U.S.-Mexico-Canada Agreement (USMCA) before Thanksgiving.

Corn: December corn futures erased most of yesterday’s early losses and ended higher for October, the second straight higher monthly close, a bullish signal heading into November. A quick close above $3.93 ¾ would set up a run at last month’s high at $4.02 ½.

Soybeans: January beans erased all of its Thursday’s losses and close higher, completing a second straight monthly gain. Key resistance remains last month’s high at $9.59 ½. Soybean deliveries against the expiring November futures totaled 1,426 today, down from 1,659 contracts on first notice day on Thursday. All were stopped by JP Morgan for a customer account that many believe is Cargill. That’s a positive development and underscores rising demand and strengthening cash basis levels.

Wheat: Futures followed corn and soybeans and Thursday to erase earlier losses and close higher for a second straight month. The market will need fresh export news to make a run at October’s highs.

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

Cattle: Live cattle may see another day of consolidation of the past three-month rally. Wholesale beef prices were mixed on moderate sales with Choice rising $2.13 and Select sliding 18 cents. Cash cattle trading is light but moving higher with $113 paid in Iowa/Minnesota and $112 in Kansas. Slaughter this week slipped to 466,000 head from 473,000 a week earlier and 480,000 a year ago. Supplies of market-ready animals remains tight and supportive to bullish cattle market outlooks.

Hogs: Futures volatility will continue. The national average cash price fell 36 cents on Thursday while wholesale pork cutout values rose 61 cents, led by strong gains in loins. Sales were moderately active. Lean hog futures saw wide-ranging trade Thursday before settling high range with moderate gains for the day but losses for the month. While weekly pork export sales were strong at more than 30,000 MT, they were down relative to the four-week average that has been skewed by a tally covering multiple past weeks of sales and China was not a major buyer and canceled sales for delivery in 2020. This adds to uncertainty about whether a trade deal with China will be completed and the level of Chinese pork import amid record prices from lost production to Africa swine fever.

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