Ahead of the Open: Soybeans May Lead Higher after USDA Confirms New Sales to China

Posted on 12/11/2019 8:02 AM

Grain Calls          

Corn: Steady to down 1 cent
Soybeans: Steady
Wheat: Down 2 to 3 cents

GENERAL COMMENTS:  Soybeans have stalled near $9 resistance as Tuesday’s USDA WASDE report provided no new positive inputs and South America weather remains mostly good for crop development outside of dryness in southern Argentina.  The biggest USDA changes came in higher Chinese crop forecasts with corn raised 6.8 million metric tons (MMT), wheat up 1.6 MMT and soybeans up 1 MMT. Corn and wheat volume continues to contract which could lead to just a little selling to push prices below near-term support and trigger fresh technical selling. Uncertainty continues to rise about the U.S. and Chinese negotiators reaching a deal before the Dec. 15 deadline for imposition of new U.S. tariffs.

The USDA daily export reporting service did report private U.S. exporter sold 585,000 MT of soybeans sold to China for delivery in 2019-20 and another 140,000 MT sold to unknown destinations for delivery this season. The report confirmed rumors of business earlier this week after China announced tariff cuts on soy and pork last Friday as a goodwill measure toward securing a trade deal with the U.S.  

Biggest hurdle in Phase 1 trade deal negotiations continues to be the U.S. insistence that China guarantee to buy a specific amount of U.S. farm products. China wants to link the size of any upfront commitment to purchase U.S. farm products on how much tariff relief the U.S. would be willing to extend immediately. U.S. President Donald Trump will be the one to make the final decision on new Chinese tariffs threatened on Dec. 15 if he doesn’t like the direction of the U.S.-China trade deal talks this week, White House trade adviser Peter Navarro said. If we get a great deal, we'll be in a good place as well, but it will be the president's decision, Navarro said.

The U.S. signed anew trade agreement yesterday with Canada and Mexico. An agreement on passing the USMCA trade deal through Congress will be a boon for US agriculture, Agriculture Secretary Sonny Perdue says. "The agreement improves virtually every component of the old NAFTA, and the agriculture industry stands to gain significantly," says Perdue, who deemed the deal "a big win" for US farmers and ranchers. The House will vote next week, and the Senate will follow in 2020 after the Christmas holiday recess.

The Federal Reserve’s FOMC ends two days of meetings and Chairman Jerome Powell will hold a press conference this afternoon. Not a single economist surveyed by Bloomberg expects the Federal Reserve to announce a change in interest rates at 1:00 p.m. CT today. For investors the decision will be all about the outlook, with the Federal Open Market Committee updating its rate forecast through 2022. Chairman Jerome Powell will give a press conference at 1:30 p.m. where he is expected to maintain his recent upbeat tone economic expansion.

Corn: Futures seen drifting amid light volume. The market needs a new spark to generate fresh buying or selling. Look for underlying support to continue to help build a sideways base of support ahead of the Jan. 10 USDA Crop Production Report update.  

SoybeansFutures should find support from USDA confirming new Chinese purchases of U.S. soybeans, but traders want to see a signed Phase 1 trade deal that leads to additional purchases.  

Wheat: Futures are struggling to build support from the USDA reducing the U.S. carryover forecast 40 million bu. yesterday, because world inventories were raised.

Egypt's state grain buyer GASC bought 355,000 MT of Russian, Romanian, Ukrainian and French wheat at its latest international purchasing tender, traders said on Tuesday. Prices on average were $2.50 per MT higher than the last tend. 

Livestock Calls

Cattle: Steady-weak
Hogs: Steady/firm

Cattle: Futures will wait to see if cash bids firm.  A low volume of cattle traded in the $118 to $119 range in Kansas Tuesday afternoon. Bids of $118 were passed in Texas, with asking prices around $121. While the initial light trade was at steady to slightly weaker prices than last week’s mostly $119 trade, most feedlots are likely to hold out for higher prices. Packer cutting margins have dropped a lot from recent levels but remain deep in the black.  Weaker beef markets are weighing on market sentiment after robust demand this week has provide sustained support.

Hogs:  The average national direct cash hog price was 62 cents higher Tuesday. The CME lean hog index is projected to be up 35 cents today and should continue to rise given ongoing cash strength. But there isn’t a lot of upside potential in nearby futures until the futures/cash gap narrows and/or there’s a China trade deal. Strong pork prices this week are a positive development.

Add new comment