Ahead of the Open: Quiet, Mixed Grain Trade Ahead of China Talks, USDA Supply and Demand Report Friday

Posted on 05/08/2019 8:02 AM

Grain Calls

Corn: Down 2 to 3 cents
Soybeans: Up 1 to 2 cents
Wheat: Down 1 to 2 cents

General Comment: U.S. grain and global markets continue to be volatile today, as traders scrutinize U.S.-China trade moves. Nobody has any idea what's going to transpire over the next three days. China’s Vice President Liu He is returning to the U.S. with trade negotiations to resume on Thursday, just hours before new U.S. tariffs go into effect. A trade deal and stability are critical for the ag markets in the year ahead.

Chinese media reported that the nation has full confidence it can overcome challenges in trade negotiations with the U.S. on the eve of the next round of talks in Washington. China state media reports that Beijing is unwilling to back down in the face of President Trump's latest threat, with China pledging not to respond with more concessions. A U.S. demand that a trade agreement lay out an inventory of laws and regulations Beijing must revise for compliance is a key issue. China has objected to including the list. But U.S. negotiators see it as essential to ensuring China delivers on promises of structural change. Attention will focus on whether the U.S. will followthrough on threats to implement tariffs on Friday, whether China will retaliate, and if talks can survive such moves.

Latest data shows that the trade war and global growth slowdown continue to take their toll on the world’s second-largest economy. China exports fell 2.7% last month compared with the same period in 2018, a sharp reversal from the 14.2% rise in March, but March figures in part were due to the rush to fill export orders before threatened U.S. tariffs took effect. The decline was a surprise. Analysts surveyed by Bloomberg had expected a 3% increase in exports. Imports, an indication of domestic demand, rebounded slightly in April by climbing 4%, reversing part of the 7.6% drop in March.

The central U.S. weather forecast is cool and wet for another few days with the heaviest rains falling across the Plains and the Midwest with totals of 1 to 2.5 inches. The system will move eastward with rains of ¼ inch to 1.5 inches.   Once rains end Friday, there is at least a five- to seven-day window of dry but cool weather that will allow for planting progress. But rains are forecast to return from west to east beginning May 17 However, the forecast offers a period of 5-7 days of cool/dry weather starting this weekend. This dry slot will allow for elevated planting progress mid to late next week. Moderate to heavy rains may return in the 10-15-day period – so the window for real planting progress is narrow.

The daily USDA export report for large sales did not report any new business this morning.

Corn market opened higher overnight and failed to extend Tuesday’s rally and retreated. Look for a lower opening with a planting window opening next week before rains return After May 17 to May 19.

Soybeans futures seen steady to firm but lacking much buying interest ahead of the USDA first 2019-20 supply and demand forecasts and U.S./China trade talks.  U.S. beans are competitive with Brazilian export offers for June and July deliveries.  China imported 7.64 MMT of soybeans during April, a 740,000-MT increase from year-ago and a notable 2.72-MMT surge from March, customs data released today showed. The big month-to-month gain can be explained by a cut in the value-added tax on ag products that took effect April 1.

Wheat futures seen slightly weaker lacking a significant global supply concern and relatively quiet exports. Russia's agriculture ministry is proposing to keep a zero tariff on wheat exports in place, a draft government document showed on Wednesday. The zero-tariff policy was introduced in 2016 and is due to expire on July 1, 2019, the document said.

Livestock Calls:

Cattle: Weaker

Hogs: Weaker

Cattle futures seen weaker after wholesale beef prices tumbled Tuesday with Choice down $3.13 and Select down $2.15. But sales were active and that should put a low in prices as grocers will gear up for Memorial Day and Father’s Day features.

Hog futures seen weaker to start. Cash hogs were mixed Tuesday and the national average price was unchanged at $79.34. Wholesale pork cutout values jumped $2.78 to $85.67. Movement was moderate. Slaughter this week is 942,000 head, down 4,000 head from a week ago and up 32,000 head from same period a year ago. Little has changed regarding African swine fever outbreak in China and rising demand for imported meat. Nonetheless, the trade talks continue to keep bulls contained because a deal would speed both Chinese purchases and shipments.

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