Ahead of the Open: Soybeans Seen Lower on Smaller China Purchases of U.S. Supplies

Posted on 12/14/2018 7:55 AM

Grain Calls

Corn: Up 1 to 2 cents
Soybeans: Down 3 to 5 cents
Wheat: Steady to down 3 cents

General Comment: Global stocks are sharply lower, and the U.S. dollar index is sharply higher on signs of slowing growth in China that some analysts are predicting will lead to a global recession or at least a sharp slowdown for emerging and developing markets. China’s Retail sales posted the worst performance since May 2003 and industrial production decelerating to 5.4%, below all pre-report estimates. China will suspend additional tariffs on U.S.-made autos for three months starting on Jan. 1 Little wonder then that the world’s second-biggest economy seems to be stepping up efforts to find an agreement with the Trump administration without appearing weak. The slowdown also is showing up in Europe where a purchasing managers index dropped to the lowest level in more than four years, largely driven by a disappointing reading from France and confirming growth risks flagged by European Central Bank President Mario Draghi yesterday. 

This morning, USDA daily export sales reporting services said private exporters sold 300,000 metric tons (MT) to China for delivery in 2018-2019. That follows a daily sales announcement of 1.13 million MT reported sold to China on Thursday. Total for the two days is 1.43 MMT, that still below the 5 MMT talk about earlier this week and will be a disappointment for soybean trade today. USDA also announced 130,000 MT sold to unknown destinations which may not be Chinese buying because Beijing would probably like to publicize new sales amid ongoing trade negotiations with the White House.

Corn is seen firmer and heading for a third straight week of gains after popping out six-week high earlier this week. Technical buying and speculation exports will improve are supporting a firmer call. China may buy at least 3 MMT of U.S. corn as soon as January, according to a Bloomberg News report, citing sources familiar with the situation. USDA daily export sales reporting service announced 125,000 MT of corn sold to Japan for delivery this marketing year.

Soybeans are seen on the defensive for a second session on smaller Chinese purchases this week. While more sales may be announced in the week ahead, they would need to be much larger than the ones seen the past two sessions. Brazilian Agriculture Minister Blairo Maggi says that China removing tariffs on U.S. soybeans would benefit Brazilian farmers by providing increase market clarity. Brazil is prepared in the even China removes tariffs on U.S. soybeans, Maggi said today.

Wheat futures seen slightly weaker to start on some profit taking following March SRW futures upside break out to the highest since Oct. 18 on Thursday. The market will remain supported by rising global prices the past few weeks, stronger U.S. export sales data and improve market sentiment. Market will be waiting for news from the Russian ag ministry meeting Dec. 21 with exporters for any clues about government plans for export restrictions.

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to weaker

Cattle futures seen steady to firmer on expectations for firmer cash bids to develop today. Packers increased sales on Thursday with 150 loads of beef sold, up from 133 on Wednesday. Choice wholesale beef carcass prices rose 22 cents on Thursday after dropping to the lowest since Oct. 24 a day earlier.  Beef prices are the highest for this time of the year since 2014, another sign of robust beef demand amid large slaughters.

Hog futures seen mixed as the 73-cent rise in wholesale pork carcass prices Thursday was accompanied by a slowdown in sales. following the cash hog market lower. The national average direct hog price was unchanged with cash hogs in Iowa/Minnesota gained 35 cents. Slaughter the first two days of this week is 48,000 higher than a year ago. That’s 2.7% more meat to move into consumption. Exports sales last week were above average, and China was a buyer of U.S. pork for a third straight week.



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