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

Posted on 11/18/2019 8:00 AM

Grain Calls          

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

General Comment: Corn, soybean and wheat all traded in the green before slipping lower ahead of this morning’s break. The chart signals remain negative and rallies are attracting selling.  Again, there was very little hard news over the weekend for the grains, leaving weather as the main catalyst. The drier forecasts for the US harvest from Friday are gone, replaced by unexpected weekend moisture over the center of the belt, and a second system due through the central harvest areas the middle of this week. Down in South America, Brazil got rains only over the north this weekend and Argie over the south, and the forecasts are for some pesky dry spots in the south of Brazil and the south of Argie to stay dry this week. About 20% of the region has stress form dry conditions.

We should see well over 90% of the beans harvested on tonight’s progress reports, and a little over three -quarters of the corn harvest completed, and wheat conditions should slip a bit.      

The Commitment of Traders reports showed larger spec selling in soybeans, smaller net selling in corn, and fund buying in the SRW wheat to flip to a small net-long position. Funds bought 27,379 soybean futures and options in the week ended Nov. 12 to move to a net-long position of 31,050, the smallest since Oct. 8. Funds sold about 6,000 contracts in corn to move to a net short position of almost 111,000 futures and options, the most since Oct. 1. Commercials were net buyers of more than 14,500 corn positions to cut their neg short positions to the smallest since Sept. 24.  

The week ahead will be dominated by China trade news, with a background susurration of December contract liquidation in front of first notice day coming up in two weeks, after which next week is expected to dive into the doldrums unless we get a blockbuster Chinese trade deal. Trade talks between the U.S. and China continued over the weekend with China’s Vice Premier Liu He speaking with Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer by phone on Saturday. The Chinese Commerce Ministry described the discussions as “constructive” and said both sides agreed to stay in close communication. With trade keeping global markets on tenterhooks, banks are building their views on the outcome of talks into 2020 forecasts. Most expect a resolution of the standoff. There were violent scenes around Hong Kong Polytechnic University as hundreds of protesters who have taken over the campus battle surrounding police. The chaos that’s gripped the city shows little sign of easing as demonstrators call for rallies near the university to support those inside. Democracy campaigners chalked up a small victory when the High Court found that the local government’s controversial face-mask ban is unconstitutional.

Global equities are rising as all the trade chatter right now sounds positive. Overnight, the MSCI Asia Pacific Index added 0.3%, with Hong Kong’s Hang Seng Index staging a rebound after last week’s selloff. In Europe, the Stoxx 600 Index was 0.6% higher. Owners of Madrid’s stock-exchange saw their shares surge the most on record as two suitors confirmed interest this morning in buying the bourse. S&P 500 futures also posted small gains overnight but turned lower this morning, while the 10-year Treasury yield fell to 1.822% and gold and crude oil were lower.

USDA daily export sales reporting services said private exporters sold 132,000 metric tons (MT) of corn for delivery to unknown destinations during the 2019/2020 marketing year.

Corn: December corn is stuck in a very narrow range after extending its decline to the lowest since Sept. 27. The market remains pressured by lack of export and biofuel.

SoybeansJanuary beans opened higher overnight on trade talk movement but failed to hold those gains aback above the 200-day moving average near $9.18 ½. U.S. oilseed processors crushed a record-large volume of soybeans in October, topping the previous monthly record set in the same month a year ago by more than 3 million bushels, according to National Oilseed Processors Association (NOPA) data issued on Friday. Soybean oil stocks at the end of October dipped to 1.423 billion pounds, from 1.442 billion in September and 1.503 billion in October 2018, NOPA said.

Wheat: Futures look poise to test the 100-day and 200-day moving average is the December SRW futures. After failing at downtrending resistance last week, the HRW December future fell this morning to the lowest this month. Strategie Grains has lowered its estimate of the soft wheat area for next year's harvest in the European Union after heavy rain disrupted field work in western EU countries. In a monthly report, the French analyst firm pegged the EU's soft wheat area for 2020 at 23.7 million hectares, down about 200,000 hectares from its initial outlook in October and now below an estimated 23.8 million hectares harvested this year. More showers expected in France this week after the recent mix of rain and snow.

Livestock Calls

Cattle: Steady to mixed
Hogs: Steady to weak

Cattle:  Cattle are expected to continue to consolidate recent strong rallies. Cattle futures paused last week as the market waited for cash gains to catch up to those of the futures market. Cash prices once again rose last week, but futures’ gains have outpaced those of the cash market. But boxed beef prices slipped on Friday and Thursday. Tyson beef plan in Kansas will resume operations the first week of December with intentions to be fully operational by the first week of January after an Aug. 9 firmer disrupted operations. That should be a positive factor to boost U.S. cash cattle prices.

Hogs:  Lean hog futures will be under pressure to start the week after falling to a two-month low basis the December contract on Friday. Pork processors killed an estimated 485,000 pigs, up 1,000 from a week earlier and 20,000 from a year ago, the USDA said. Weekly slaughter rose 129,000 head, or 4.7%, to 2.749 million last week. However, wholesale pork cutout values rose 32 cents and near a three-month high, USDA data on Friday showed. Packers' margins have climbed as large supplies of hogs have weighed on prices for the farm animals. Margins were $87.60 per head, up from $68 a week earlier, according to livestock marketing advisory service HedgersEdge.com. U.S. pork sales to China are being hampered by steep tariffs that Beijing imposed on imports of U.S. pork last year as part of the countries' trade war. Still, Net sales of U.S. pork to China from Nov. 1-7 were 5,549 MT, the highest in a month, according to USDA data on Friday. Shipments of U.S. pork to China reached 10,933 MT, in line with recent weeks. China's agricultural ministry has urged all-out efforts in the country's nine provincial-level regions to restore hog production in a bid to stabilize pork prices. Local authorities should address key issues in the pig-raising industry, including the lack of large-scale breeding farms in the southwest regions as well as environmental concerns, according to a meeting held by the Ministry of Agriculture and Rural Affairs in Nanchang, Jiangxi Province.

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