Ahead of the Open: Quiet Session Ahead of Fed Rate Decision and Next Week's USDA Crop Update

Posted on 10/30/2019 7:59 AM

Grain Calls

Corn: Mixed to up 1 cent
Soybeans: Steady to up 2 cents
Wheat: Down 2 to 4 cents

General Comment: Look for slightly another session of choppy, sideways trading, but corn and soybeans did find some underlying support yesterday that suggest limited additional downside risk before the Nov. 8 USDA Crop Production and WASDE Reports. Look for prices to drift into the end of October tomorrow. Wheat prices have a softer tone this morning.

The U.S. weather looks wet and cold with more snow the next few days, adding to harvest delays and worries about field losses. Weekend weather looks drier but cold. Another storm front moves through the Midwest by the middle of next week.

South American weather leans a little price negative with rains forecasts across much of Argentina and Brazil. Those rains are important and need to verify to ease soil moisture deficits from light October precipitation.

The dollar is slightly weaker, global stocks are mixed ahead of the Fed decision on interest rates today. U.S. growth slowed less than expected in the 3rd quarter because of resilient consumer spending and a rebound in exports.  The Federal Reserve is widely expected to announce a 25 basis-point trim to the target range for the Fed funds rate to 1.50% to 1.75% when the Federal Open Market Committee (FOMC) meeting concludes this afternoon at 1 p.m. CT. The CME FedWatch tool expectations for the cut were at 96.2% ahead of the U.S. trading day, with only a 3.8% possibility that the Fed will make no change to rates. The slim chance for a no-rate-cut action is driven in part by positive signals on the U.S./China trade front — something the Fed has cited in its prior decisions to lower rates.

China's Foreign Ministry said on Wednesday that top China and U.S. trade negotiators will speak again soon after a U.S. administration official said Tuesday an interim trade agreement between the United States and China might not be completed in time for signing in Chile next month as expected. U.S. President Donald Trump's demand that Beijing commit to big purchases of American farm products has become a major sticking point in talks to end the Sino-U.S. trade war. Trump has said publicly that China could buy as much as $50 billion of U.S. farm products, more than double the annual amount it did the year before the trade war started.  U.S. officials continue to push for that in talks, while Beijing is balking at committing to a large figure and a specific time frame. Chinese buyers would like the discretion to buy based on market conditions.  "China does not want to buy a lot of products that people here don't need or to buy something at a time when it is not in demand," an official from a Chinese state-owned company told Reuters.  If U.S. agricultural products "enter China in a concentrated way, it might be hard for the domestic market to digest," the Chinese official added.  The hefty agricultural purchases Trump is asking for are market distortive, Lamb-Hale said. China is telling Trump they are just not feasible.

Thomson-Reuters Constant Commodity Index is heading for the highest month-end close. The index of 17 commodities is about 1.30 points away from July highs at 403.77. A close above that level could help to attract some additional money flow into the commodity markets heading into the year end.

Agricultural commodities trader Bunge Ltd reported a better-than-expected quarterly profit on Wednesday, driven by higher margins on its edible oil products. However, based on the current agribusiness environment, which has become more challenging, Bunge now expects a decline in earnings versus 2018. This outlook excludes notable items, the favorable impact of Bunge Ventures’ investment in Beyond Meat and higher results in sugar & bioenergy.

USDA daily export sales reporting services said private exporters sold 132,000 metric tons of soybeans for delivery to unknown destinations during the 2019-20 marketing year. The sale is probably to Chinese crushers but it too small to have a strong positive impact on soybean futures.

Corn: December fell to a new 12-session low and closed higher, just missing forming a bullish outside-day reversal. Prices opened lower last night and rallied above Tuesday’s high but lack much follow-through buying interest. Look for another weekly gain in Ethanol production in this morning’s update but export continue slow with Taiwan buying 63,000 metric tons (MT) of Brazilian corn. Still, the firm U.S. corn basis levels continue to be offset by slow export sales and shipments. The market will need confirmation of a smaller crop next week to resume this fall’s rally.

SoybeansNovember futures are trading inside of Tuesday’s range when prices fell to a new 15-session low at $9.16. Good support starts at yesterday’s low down to this month’s low at $9.03 ¼. A close above $9.28 would be a positive signal Malaysian palm oil futures extended gains for a sixth straight session on Wednesday to hit a nearly 17-month high, as they tracked gains in China and rival oils.

Wheat: Futures seen slipping lower on worries the recent increase in world tenders may have covered near-term importer needs.  

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

Cattle: Live cattle should start firmer after wholesale beef prices surged higher yesterday. Choice beef gained $2.65 and Select jumped $2.81, although sales were sluggish. Despite the beef strength, packers bid lower for cattle, but few sales were completed.

Hogs: Futures may start steady to weak amid mixed cash hog trends Tuesday and firmer pork prices. The national average cash hog prices dipped 48 cents but bids in Iowa/Minnesota rose 17 cents. The wholesale pork cutout value rose 69 cents on strong daily sales. Prices were up for all primal cuts but loins. Hog slaughter remains record large, up 1,000 head from a week ago and 48,000 head greater than a year ago. It could be a slow session as traders wait for weekly USDA export sales update on Thursday.

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