Ahead of the Open: More Sideways, Choppy Trade With Little Fresh News

Posted on 09/20/2019 7:58 AM

Grain Calls

Corn: Steady to down 1 cent
Soybeans: Down 2 to 3 cents
Wheat: Mixed

General Comment: Corn and wheat prices are headed for higher weekly closes and beans are lower for the week. Volume continues light with few new incentives to establish either new long or short positions. Underlying support this week stems from the relentless Midwest rain forecast that is threatening both yields and quality. Charts are more positive but export demand for U.S. supplies is tepid and there is little fresh news from this week’s U.S.-China trade talks. 

In South America, Brazil’s primary corn and soybean growing regions are historically dry as planting for the 2019-20 cycle begins. Rains should begin soon though weather forecasts disagree on the intensity, but either way, analysts see both upcoming harvests hitting new records early next year based on ideas weather improve. Mostly dry conditions will continue through Monday before rain increases from Sao Paulo into Minas Gerais and Bahia Tuesday into Thursday of next week. The Sep. 27-Oct. 3 period will feature increasing showers in many areas, especially the north, but rain will be mostly poorly organized and outside of some locally strong storms most areas will still need greater rain to improve conditions. Argentina has a restricted rainfall pattern remaining in place through at least the next ten days and greater rain is needed in many areas to improve conditions. Western Argentina wheat remains in need of rain to improve conditions.

Exports sales for corn and soybean improved this week but much more business is needed. For the week ended September 12th, U.S. all wheat sales were running 21% ahead of a year ago and shipments up 29% with the USDA forecasting a 4% increase on the year. Corn sales were running 48% behind a year ago and shipments 52% behind with the USDA forecasting a no change in exports. Soybean sales were running 37% behind a year ago and shipments 28% behind with the USDA forecasting a 2% increase year over year.  The pace of both corn and soybean forward sales is the worst in more than a decade and will continue to limit rallies.

Trade advisor Michael Pillsbury told the South China Morning Post that President Trump could ramp up pressure by raising tariffs “to 50% or 100%” if there’s no deal soon. Some observers think Pillsbury is going too far with such statements and say Trump has never needed anyone to say what he may or may not do. But Pillsbury's comments Thursday were one of the factors cited for lower U.S. equities.    

The Chinese delegation in Washington meeting this week to discuss trade will be visiting U.S. farms next week, US Agricultural Secretary Sonny Perdue confirmed. The Chinese delegation wishes to observe US farm operations, and the USDA hopes that this will help when the two sides negotiate a deal in October, which has yet to be schedule.

In about two months, Presidents Donald Trump and Xi Jinping should be traveling to Santiago, Chile for the Asia Pacific Economic Cooperation forum’s annual leaders’ summit scheduled for Nov. 16-17. If they're there and meet, it will be their third sit down since the imposition of tariffs. Their previous meetings in December 2018 and June this year forged truces that recharged negotiations and at least temporarily tamped down tensions but yielded no deal. Heading into Santiago, the question will of course be if this time is different.

World shares climbed on Friday as stimulus measures by major central banks eased worries about growth, especially in Asian markets, while oil headed for its best week since January. China cut a key lending rate for the second straight month on Friday, becoming the third major central bank to cut interest rates in recent days, after the European Central Bank and the U.S. Federal Reserve. Dig into recent comments and there’s a clear divergence between domestic and external factors, with optimism about consumer and the jobs market, but a growing sense of apprehension over the impact of trade tensions. The Federal Reserve’s statement this week added a line that “exports have weakened,” signaling the global slowdown and the protectionist conflict between the U.S. and China is becoming a bigger worry.   

USDA’s daily export sales reporting service announced no new large sales by private exporters.  

Corn: Futures are about 3 cents higher this week and a close above last week’s settlement at $3.68 ¾ would be a positive technical signal after holding support at 20-day moving average earlier this week.

SoybeansNovember futures are about a dime lower this week amid forecasts for beneficial moisture in Brazil starting next week. If those rains fizzle, it could begin another leg higher.   

Wheat: Futures are heading for a weekly gain as too much rain remains a problem for U.S. and Canadian harvesting while a flurry of new export business, albeit non-U.S. origin supplies, suggests the markets is making a seasonal low. Dry weather across most of Ukraine has delayed the sowing of winter grain for next year's crop in one of the top Black Sea grain exporters. Ukraine and its rival on Black Sea grain exports, Russia, are both looking for rains in coming weeks. In Russia, though, the sowing is still running ahead of the last year's pace. Dry weather also threatening winter wheat planting in China.

Livestock Calls

Cattle: Steady to firm
Hogs: Weaker

Cattle: Cattle seen steady to firm as cash cattle are building a seasonal low with tonight’s Sept. 1 feedlot inventory expected to show the first drop in supply year over year in 2 ½ years. Wholesale beef prices were mixed on Thursday with Choice down 7 cents and Select up 19 cents. Sales have been very active this week and that is good news. Slaughter this week is down 3,000 head from a year ago and up 5,000 from a week ago. The latest weekly cattle weight data shows dressed weights are 10 lbs. below a year ago. That’s why choice cutouts are trading $26.01 higher than select and a positive factor for the cash cattle trade. 

Hogs: Look for a weak mixed start after futures posted a solid recovery from early-session lows on Thursday. Cash hogs were mixed yesterday with the national average prices sliding 25 cents but Iowa/Minnesota pigs rising 19 cents. Pork cutout values rose 91 cents yesterday on strong sales for fourth straight session. Big supplies continue to limit strength from developing in the cash hog market and keeping pressure on nearby futures. Slaughter this week is up 8,000 head from last week’s record kill for this time of the year. The increasing futures premium to the cash market is all about potential Chines pork import demand developing in late 2019 and into 2020 South Korea is investigating more suspected case of African swine fever in farms near its border with North Korea, where the disease was first confirmed earlier this week. Officials say the next three weeks will be crucial for fighting the outbreak, given ASF’s incubation periods. … A new case of African swine fever (ASF) has been reported at a privately-held farm in Russia’s Primorsk region near the border with China. There have been several cases of the deadly virus in the region in recent months.

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