Ahead of the Open: Small Corrective Grain, Soy Bounces, China Buys Pork

Posted on 08/15/2019 7:55 AM

GRAIN CALLS:

Corn: Up 2 to 4 cents
Soybeans: Up 1 to 3 cents
Wheat: Mixed

General Comment: Corn rose for the first time in four sessions on Thursday as bargain buying lifted prices, though gains were limited by expectations of beneficial rain across the U.S. Midwest. Soybean also trading firmer this morning, but wheat fell on already ample supplies boosted by a large harvest in western Europe. Forecasts for some rain in key growing areas of the U.S. Midwest in the coming weeks is keeping a lid on corn and soybean advances and bolstered the production view issued by the USDA on Monday.

China's threat to impose countermeasures in retaliation for the latest U.S. tariffs knocked stocks sprawling on Thursday, checking earlier attempt to recover from a rout sparked by fears of a world recession. Ironically, President Trump backed off part of the plan on Tuesday on some of the items on the list in hopes of blunting their impact on U.S. holiday sales. Those tariffs will still apply from Mid-December. Expectations the U.S. Federal Reserve and other central banks would respond robustly to the recession warning helped world stocks to steady earlier. But that recovery was cut short by the latest rhetoric from Beijing. The China Finance Ministry said earlier Thursday that the U.S. tariffs violated a consensus reached by both sides to resolving disputes via negotiations.  Recession fears grew on Wednesday after yields on 10-year Treasury bonds dropped to less than two-year rates for the first time in 12 years, when the same yield curve inversion presaged the 2008 recession.

Chinese paramilitary forces conducted exercises across the border from Hong Kong on Thursday, raising fears that Beijing may be preparing to act against mass demonstrations in the Asian financial hub it has described as "near terrorism". Police tactics are toughening after 10 weeks of increasingly violent confrontations between police and protesters have plunged Hong Kong into its worst crisis since it reverted from British to Chinese rule in 1997.  The protesters have five demands, including the complete withdrawal of a now-suspended extradition bill that would have allowed criminal suspects to be sent for trial in mainland Chinese courts. The protesters also want authorities to stop referring to their actions as "rioting", charges against detainees dropped, a resumption of political reforms and an independent inquiry into police actions during the unrest.

Today’s weekly export sales report was disappointing for corn and soybeans and modest for wheat. USDA reported net sales reductions of 109,900 metric tons (MT) of soybean last week included 422,700 MT reductions by China and 124,000 for unknown destinations. New crop sales rebounded to 817,400 MT topping trade estimates for 100,000 to 400,000 MT but did not included any Chinese buying. Corn old-crop export sales were 56,100 and new-crop sales were 307,600 MT, inline with trade estimates but down from a year ago.  Wheat sales slipped slightly from a week ago with 462,200 MT sold last week, near the top end of trade estimates.  

USDA daily export announcement service said private exporters reported no large new export sales in the past 24 hours.

Corn: December futures opened slightly higher and continued to firm overnight before this morning trading pause. The emotional selloff this week probably has run its course with weather and Pro Farmer Midwest Crop Tour data coming up next week.

Soybeans: The market is trying to build a new basis of support but needs some fresh Chinese buying to move higher.

Wheat: Futures seen narrowly mixed with modest weekly export business offset by abundant global supplies. Egypt's General Authority for Supply Commodities (GASC) set a tender on Wednesday to buy an unspecified amount of wheat from global suppliers for shipment from Sept. 15 to 30. In its most recent international wheat tender on Aug. 6, GASC bought 415,000 MT of Romanian, Ukrainian and Russian wheat for shipment from Sept. 5 to 15. Ukraine and Romania look cheapest, Russia too expensive. Strategie Grains has made a sharp increase to its forecasts for European Union production and exports of soft wheat. The French consultancy now sees 2019-20 soft wheat production in the EU at 142.9 MMT up from 140.6 MMT projected in July and 12% above last year's drought-hit crop, it said in a monthly grain report. For exports, forecast EU soft wheat shipments were put at 24.8 MMT, up from 21.9 MMT estimated by Strategie Grains a month ago and up from 21 MMT last season  A fall in west European prices had improved their competitiveness against Black Sea suppliers such as Russia, it said.

LIVESTOCK CALLS:

Cattle: Steady to firm
Hogs: Firm

Cattle: Futures seen steady to firm. Choice boxed beef prices have surged nearly $16 over the past week, including a $5.98 jump on Wednesday on active sales. The Tyson plant that was taken offline by a fire has tightened the availability of beef. Packer profit margins are also soaring to new records above $240 a head. Remaining plants are processing all the beef that they can. Slaughter this week is down 8,000 head from a week ago and 7,000 head from a year ago. The market also breathed a sigh of relief when cash cattle trade got underway yesterday at $105 in the South and from $106.50 to $108 in the North, higher than feared earlier this week and much higher than current futures. At a briefing Wednesday, Tyson officials did not have a timeline for reopening the plant but indicated the fire impacted critical operating systems. The weekly USDA beef export sales report showed 2019 sales fell 27% from a week earlier to 16,200 MT. Shipments fell 12% from the four-week average.

Hogs:  Lean hog futures may try to follow the lead of the beef markets. USDA’s weekly pork sales rose 25% above the prior four-week average to 20,400 MT and included 10,200 MT sold to China. Shipments slipped to 26,400 MT with Mexico taking 7,200 MT and China the destination for 6,800 MT.  Cash hogs fell another 56 cents on Wednesday and the wholesale pork cutout values declined 31 cents. Domestic pork sales were sluggish.

Add new comment