Ahead of the Open: Quiet Amid Light News and Waiting for China News, Friday's Export Report

Posted on 11/14/2019 7:48 AM

Grain Calls

Corn: Steady to up 1 cent
Soybeans: Steady to down 2 cents
Wheat: Narrowly mixed

General Comment: Corn and wheat found some light support after falling below yesterday’s lows, but the rebound is limited amid weakness in soybeans. The markets are watching for a White House comment to China talking about increasing serious trade talk discussions. Still, a lot of moving parts for a completed deal, including when tariffs will be lifted and the size of Chinese purchases of U.S. farm goods.  Harvesting of corn and soybeans should be above to move forward the next two weeks amid moderating Midwest temperatures and drier weather. South America weather looks a little drier in Southern Brazil and northern Argentina. Pacific Oceans are warming and that means more uncertainty about rainfall from Dec. 15 through January. USDA weekly export sales report is delayed until Friday morning.

China and the United States are holding "in-depth" discussions on a first phase trade agreement, and cancelling tariffs is an important condition to reaching a deal, the Chinese commerce ministry said on Thursday. The degree of tariff cancellation should fully reflect the importance of a 'phase one' agreement, ministry spokesman Gao Feng told a regular briefing. "China has emphasized many times that the trade war began with additional tariffs and should end with the cancellation of additional tariffs," said Gao. China’s customs office announced today it was lifting its ban on poultry meat from the U.S., effective immediately. China had banned all U.S. poultry and eggs since January 2015 when the U.S. was dealing with an outbreak of avian flu.

The government comments followed further signs of slowing growth in China.  China's factory output growth slowed significantly more than expected in October. Industrial production rose 4.7% year-on-year in October, data from the National Bureau of Statistics released on Thursday showed, below the median forecast of 5.4% growth in a Reuters poll and slower than September's 5.8%.Meanwhile, fixed asset investment, a key driver of economic growth, rose just 5.2% from January-October, against expected growth of 5.4% and the weakest pace since Reuters record began in 1996. At the same time, local governments are facing increasing fiscal strains as tax cuts and the broader slowdown reduce revenues, hampering the big infrastructure projects Beijing needs to revive growth. Retail sales rose 7.2% year-on-year in October, missing expected growth of 7.9% and matching the more than 16-year low hit in April. To prop up growth, China's central bank this month cut the interest rate on its one-year medium-term lending facility loans, a key policy rate, for the first time since early 2016. In a front-page editorial on Thursday, the state-owned Securities Times said authorities should tolerate longer-term increases in China's debt-to-gross domestic product ratio to allow for changing economic conditions.

USDA daily export sales reporting services said private exporters sold 129,000 metric tons of soybeans for delivery to China during the 2019-20 marketing year. That follows sales of 106,000 MT of soybeans to unknown destinates on Wednesday and a mildly supportive for prices today.

 

Corn: December corn opened lower and tried to rally back above Wednesday’s high without success overnight. The market is back to midrange at the break. Momentum remains down and funds continue to look to sell rallies. 

SoybeansJanuary beans also opened lower and tried to rally before pushing to new swing lows this morning and testing the 100-day moving average. U.S. soybean processors ramped up crush last month amid increased supplies. Crush may have risen to 166.795 million bu. in October, according to the average of nine analysts estimates in a Reuters poll. That below the record 172.346 million bu. a year earlier and up 9.3% from the 152.566 million bu. crushed in September. The National Oilseed Processors Association releases its monthly update at 11 a.m. CST on Friday. Stocks of soybean oil seed falling to 1.42 billion lbs. from 1.503 billion a year ago. Palm oil futures rose in Malaysia on news of large new deals announced to China, United Arab Emirates and India that account for more than 20% of Malaysia’s output.

Wheat: Futures tried to bounce overnight but are slipping back toward yesterday’s lows after Egypt’s latest tender for an unspecified amount of wheat and Jordan tendering for 120,000 MT. The lowest offer in Egypt’s tender was $115.86 per MT, up $1 from $114.86 paid in Nov. 4 purchases. The Rosario Grains Exchange cut its Argentine wheat crop estimate 1 MMT to 19 MMT. Dry weather has eroded crop prospects. Last week, USDA trimmed its Argentine wheat crop estimate to 20 MMT. Improving competitiveness of European wheat on world markets prompted consultancy Strategie Grains on Thursday to lift its outlook for this season's EU soft wheat exports to 28.8 MMT, up from 27.3 MMT projected last month and now nearly 7 MMT above its July estimate. This season's exports are set to rise 40% from last year's but still fall short of the 2015-16 record.

Livestock Calls

Cattle: Steady to firm
Hogs: Steady to weak

Cattle:  Cattle are expected to start firmer after yesterday’s pullback. Unofficial reports signal cash cattle trade got started in Kansas and Texas at $115 yesterday, steady to up a dollar from the bulk of trade last week. Boxed beef prices continue to soar. Choice jumped another $1.84 to $242.34, the highest since June 2017 and Choice gained $1.30.Sales were moderately active December futures are already $3 above this week’s early cash action and market weights last week rose 2 lbs. from a week earlier but were still 6 lbs. below a year ago.

Hogs:  Lean hog futures seen steady to weak, adding to Wednesday’s declines. Cash hogs were lower with the national average price down 49 cents and the pork cutout value sliding $1.51. Hams led the setback after reaching a new five-year high on Tuesday. Slaughter this week is up 14,000 head from a year ago.

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