Ahead of the Open: Rains Boost Foreign Crops, Hints of Drier U.S. Planting Weather

Posted on 04/16/2019 7:57 AM

Grain Calls

Corn: Down 1 to 2 cents

Soybeans: Down 2-3 cents

Wheat: Down 2 to 5 cents

General Comment: Corn and soybeans are quietly lower, retreating from Monday’s gains as wheat prices head for a second day of declines and leads lower this morning. Oil prices are sliding lower on rising U.S. and world production. Emerging-market shares in Asia rose on Tuesday on stronger housing prices in China suggesting the governments stimulus efforts are translating into strong growth. China stock indices rose more than 2% supporting a sixth day of gains in European stocks and a stronger opening call for Wall Street this morning. 
No fresh news from either the Japan or Chinese trade talks this morning. President Donald Trump said on Monday he believed the United States would emerge from its trade dispute with China as a winner, no matter what happened. "We're going to win either way. We either win by getting a deal or we win by not getting a deal," Trump said during a visit to a business roundtable in Burnsville, Minnesota. Trump’s comments don’t inspire much confidence for grain traders looking for specifics from a completed deal. Trump's Treasury secretary, Steven Mnuchin, said earlier on Monday that trade negotiators are making a lot of progress. He told Fox Business Network there is more work to do, however, including enforcement. While the weather pattern will see warming temperatures the next two weeks, it will not moderate in precipitation. At least three strong storms will keep much of the central and eastern U.S. wet and warmer temperatures will melt last week’s heavy snows, adding to the flooding concerns.

USDA did not report any new large daily sale this morning. On Monday, private exporters reported to the USDA export sales of 140,000 metric tons MT of soybeans for delivery to unknown destinations during the 2018/2019 marketing year.

Corn market is seen giving back Monday’s gains on rains in Brazil, aiding the yield potential of the second season crop and increasing competition for U.S. supplies on the world market. The  U.S. corn seeding as of Sunday reached 3% complete, even with this week a year ago and the 5% progress on average the past five years. Only 2.8 days since April 1 have suitable for fieldwork in Iowa and Illinois. Little/no progress is expected there this week, and so key will be whether drier model guidance overnight verifies in late Apr/early May.

Soybean futures are also in retreat amid worries about demand for U.S. supplies with big crops coming in from both Argentina and Brazil. Tuesday’s NOPA crush report was supportive for CBOT soybeans as it confirmed that the strong US soybean crush pace continues. NOPA reported a March soybean crush total of 170 Mil Bu, which was just short of last year’s record. However, the March data begins to hint that a seasonal slow-down could be getting underway as the per day crush rate was the down fractionally from February. Soybean meal registered for delivery fell 210 contracts to zero overnight, a sign of tightening supplies. 

Wheat futures are seen lower amid strong U.S. winter wheat crop ratings and a slightly drier forecasts for late April and early May spring wheat planting progress. More rain forecast for the Plains and parts of the EU and Black Sea region this week add to the pressure. About 60% of the winter crop rated “good” and “excellent” as of April 14, unchanged from a week earlier and up from 31% a year ago. Spring wheat planting was reported 2% done this week, compared with 3% a year ago and 13% on average the past five year.  A delegation representing the United States wheat industry is visiting Brazil this week to talk to millers and food industries to gauge potential for higher import demand once a 750,000 MT tariff-free quota is implemented, according to the U.S. Wheat Associates. Brazilian mills buy around 6 MMT of wheat per year. Most of the imported wheat comes from Argentina, which benefits from a zero-import tariff

Livestock Calls:

Cattle: Steady to firm

Hogs: Steady to firm

Cattle futures seen steady to firm on stronger wholesale beef prices and expectations for steady to higher cash cattle markets this week. Choice beef prices rose $2.23 to $230.98, the highest since last May. Select rose 20 cents to the highest since June 2017.  

Hog futures seen opening steady to firmer. The pork market also got off to a strong start to the week, with the pork cutout value jumping $1.33 on a sharp $7.39 rise in belly prices. Sales were sluggish on Monday. Overall demand is good and the spread of African swine fever across China has strengthened already strong overseas demand for pork. Cash hog bids rose 13 cents on Monday.

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