Ahead of the Open: Soybeans Head Lower for a Second Day with Grains Weak

Posted on 10/10/2018 7:16 AM

Grain Calls

Corn: Steady to down 1 cent

Soybeans: Down 3 to 4 cents

Wheat:  Down 1 to 2 cents

General Comment:  President Donald Trump repeated his threat to impose tariffs on $267 billion worth of additional Chinese imports if China retaliates for the recent levies. Trump also repeated that China is not ready yet to reach a deal on trade and that several meetings with the country have been canceled. There are growing signs that China’s yuan may weaken past 7 per dollar for the first time in a decade. A former central bank adviser wrote in a China Securities Journal that tolerance of yuan weakness is needed to reform the exchange-rate regime, a viewpoint that may presage a breach of the key psychological level ahead of next week’s Treasury Department decision on whether to name China a currency manipulator. Hurricane Michael strengthened to a “dangerous” Category 4 storm ahead of making landfall later today near Panama City, Florida. The fast-moving weather system has already cut oil production by 40 percent and natural gas output by 28 percent in the Gulf of Mexico. Grain and cotton traders will be watching to see how fast the storm moves through the Southeast because unlike Hurricane Florence, which lingered in the region, this storm will move quickly north, potentially limiting crop damage. Rains begin diminishing across the Midwest today, allowing for a drier but colder weather pattern to move into the region for about two weeks.

Corn futures are seen mixed in a quiet trade ahead of the USDA’s October Crop Production and World Agricultural Supply & Demand Reports on Thursday. Excessive rain over the past week have slowed the harvesting as rising water levels closed at least three locks on the upper Mississippi River, boosting cash bids for immediate supplies. The U.S. corn harvest was 34% complete on Oct. 7, up from 26% last week and ahead of the 5-year average of 26%. USDA reported Tuesday that corn inspected for export since Sept. 1 is u 62% from a year ago, compared with USDA forecasting a 1% drop for the fully year. U.S. President Donald Trump announced Tuesday the lifting of a ban on summer sales of gasoline blended with 15% ethanol.

Soybean market heads for a second straight decline on expectations for USDA on Thursday to raise its production forecast and carryover projection amid ongoing concerns about a protracted trade war with China. The U.S. soybean harvest was 32% complete, up from 23% last week and slightly below the 5-year average of 36%. On Tuesday, USDA said soybeans inspected for exports since Sept. 1 are down 35% from a year ago, compared with USDA forecasting a 3% drop for the season. China sells 101,057 metric tons of soybean at auction of state reserves at an average price of 3,196 yuan per ton, or $12.57 a bushel, the National Grain Trade Centre said on Wednesday. China may still have more than 6 MMT to as much as 10 MMT of reserves left to sell, depending on how many imported beans were put into government reserves. China soybean futures were lower overnight even as soymeal prices rose.

Wheat futures seen slightly lower on increasing world supplies and competition for U.S. exports. The Russian Ministry of Agriculture raised its forecast for wheat crop in 2018 from 64.4 MMT to 68-69 MMT. FranceAgriMer raised its projection of pegged French soft wheat exports to non-EU destinations at 8.75 MMT, up from its initial outlook of 8.5 million last month and compared with 8.1 MMT last season. Projected soft wheat exports within the EU were lowered to 7.9 MMT from 8.1 million last month. U.S. Winter Wheat plantings were pegged at 57% complete versus 43% last week and up from the prior five-year average of 54%. Recent rains have been mostly beneficial, except in a few spots that may need to be replanted.

Livestock Calls

Cattle: Steady to weak

Hogs: Steady to mixed

Cattle futures seen starting steady to weak. Tuesday’s late retreat was a negative signal. Tuesday’s lows are key support should the wholesale beef market remain under pressure today. On Tuesday, Choice beef prices fell 36 cents and Select rose 91 cents. Choice cutouts continue to extend this year’s decline with values at the lowest since Dec. 29. Negotiated cattle trade on Monday was inactive on light demand. Slaughter was 232,000 head the first two days of this week, down 6,000 head from a week ago and 2,000 head smaller than a year earlier. Packers appear to be in no hurry to boost supplies in a falling beef market. Feeder cattle trading was sharply lower Monday at Oklahoma auctions, adding to overhead resistance to rallies today.

Hog futures seen steady to mixed. Wholesale pork carcass prices rose 13 cents, inching away from the lowest Sept. 19. Slaughter rose to 946,000 the first two days of this week from 930,000 a week ago. China lifted the restriction in eastern Zhejiang province where African swine fever was found in August. The government said local authorities must take proactive measures to prevent a recurrence of the highly contagious disease.

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