Ahead of the Open: Quiet Consolidation in Corn, Soy Near Multi-Week Lows

Posted on 11/20/2019 7:52 AM

Grain Calls          

Corn: Down ½ cent to 2 cents
Soybeans: Up 2 to 3 cents
Wheat: Steady to down 2 cents

General Comment: Corn and soybeans continue to consolidate near multi-week lows looking for a fresh fundamental story. Wheat falls back after the U.S. crop rating drop this week failed to provide much lasting strength with global supplies still more than adequate. Traders await more indications on U.S.-China trade talks and U.S. corn and soybean harvest results to gain a clearer picture of yields after weather delays this year. However, rainfall in Brazil and Argentina, which should help planting prospects for corn and soybeans, were keeping a lid on the market.

The U.S. Midwest weather forecast doesn’t have much change as widespread precipitation is seen for the region starting later today but turning drier by Friday into early next week. Rains to return the middle of next week. The South American weather forecast for Brazil in the 6- to 10-day outlook is still for rainfall to be seen across most areas. Argentina has rains for most areas early next week before quieting down the rest of next week. Temps continue to run near average in most of South America over the next 10 days.

Global stocks fell from a 22-month high today and bond yields are falling after the U.S. Senate unanimously passed a bill Tuesday aimed at supporting protesters in Hong Kong and warning China against a violent suppression of the demonstrations. In response, China has reiterated a threat to impose unspecified retaliation if the bill became law and urged America to stop meddling in Hong Kong affairs. It’s casting a longer shadow over any hopes for a trade deal, which still looks to be some way off. Uncertainty about what happens next have some traders are watching a local election in Hong Kong will be a new flashpoint in U.S.-China trade talks. 
However, the two sides are discussing linking the size of tariff rollbacks to the preliminary terms set in that failed May deal, according to Bloomberg News, citing to several people, two of whom said the White House is still debating the precise percentage. Reports range from a 35% to 60% reduction. China has demanded that all tariffs imposed after May be removed immediately and then tariffs imposed before that be lifted gradually, according to one of the people. Some Trump advisors had been pushing to keep those in place longer term, to ensure China lives up to its end of the bargain, but now are open to a partial relief in order to get the Phase 1 deal signed.

If the world economy is stabilizing as some analysts suggest and many investors are betting, the date is not showing it yet. Shipments of goods from Japan, the world’s third-largest economy, suffered their largest drop in three years in October, hurt not just by the U.S.-China trade war but also by extreme weather at home.  Another of East Asia’s manufacturing powerhouses, Taiwan, also showed ongoing weakness in overseas demand, though perhaps with some signs of bottoming. Taiwan’s export orders fell 3.5% in October, better than the expected 4.5% decline and the 4.9% drop in September. That follows a mixed picture earlier this week from Singapore, where data showed better-than-expected demand for electronics, but exports overall still had their worst year-on-year showing since June.

USDA daily export sales reporting service said private exporters did not make any large new sales in the past 24 hours. That follows news yesterday of new sales of 191,000 metric tons of corn for delivery to unknown destinations during the 2019-20 marketing year and a 132,000-metric-ton sale announced Monday to unknown destinations.


Corn: December corn’s short-covering pause yesterday failed to produce much follow-through strength overnight.  

SoybeansJanuary beans are trying to bounce away from seven-week lows this morning without much enthusiasm. Brazilian farmers had planted around 71% of their intended soybean crop as of Friday, a 13-point gain from the week prior, according to the ag consultancy ARC Mercosul. Improved rains have helped planting to pick up after a slow start. Progress now lags the five-year average by just 2 percentage points

Wheat: Futures seen defensive to begin the session to test the underlying bullish technical market action earlier this week. But Russia will boost its exports of grain in the second half of the current marketing year that ends in June despite the intensification of competition, according to the president of the Russian Grain Union.

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

Cattle:  Cattle are seen steady to mixed to start waiting for evidence of high cash cattle prices this week. Packers are still enjoying impressive processing margins just shy of $330 a head, and boxed beef values remain at elevated levels, though Choice and Select values did edge lower Tuesday. In addition, herd expansion has come to an end and a downed Tyson plant will come back online in the weeks ahead. Cold Storage and Cattle on Feed Reports loom at week’s end. Pausing would favor bigger gains in live cattle into year end.

Hogs:  Lean hog futures seen steady to weak. Pork cutout values reversed midday gains and fell sharply lower by the close. Cutout fell $4.47 led by declines in hams and bellies. Sales were active indicating demand under the market. National cash hog prices were 17 cents higher with Iowa/Minnesota bids rising 30 cents. Slaughter this week is up 31,000 head from a year ago and remains a cap to rallies. After leaving behind a selling tail yesterday, Tuesday’s lows are key support. According to JCI statistics, China’s pig price has declined 19.4% in Nov. Price has declined to around 30yuan/kg in the north. Main pig producers have cut selling price by 14%-19%. Slower consumer demand, rising slaughter rates and increased pork and chicken imports all helped to bring down prices. Piglet feed consumption still declined 53.2% in the third quarter of 2019 from a year earlier, indicating that pig supply will decline obviously in the fourth quarter of 2019 from a year earlier.

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