Ahead of the Open: Waiting for Details of Quantities of Ag Goods China Agreed to Buy

Posted on 01/10/2019 7:32 AM

Grain Calls

Corn:  Steady 
Soybeans: Steady to down 3 cents 
Wheat: Steady to down 2 cents

General Comment: The Trump administration is pushing for a way to make sure China delivers on its commitments in any deal the two nations reach to defuse a trade war roiling financial markets.  U.S./China trade talks this week focused on Beijing's pledge to buy a "substantial amount" of American agricultural, energy and other goods and services, the U.S. Trade Representative's office said yesterday. Grains markets will be listening to President Trump on Monday when he speaks at the annual convention of the America Farm Bureau Federation in New Orleans.  This is the second straight year Trump will address the convention.

President Trump continues to rattle Congress. He is setting up for a new fight with congressional Republicans as he seeks expanded unilateral tariff powers. Also, Trump’s decision to abruptly depart a White House meeting with House Speaker Nancy Pelosi on Wednesday reduces the chances for near-term deal to end the nearly three-week-old government shutdown.  

Correlated movements between assets based on a particular investment style have reached the highest level in two decades, according to research from Sanford C Bernstein, Bloomberg reports. The move is unusual. It does seem to indicate that stronger stocks may be required to support commodity rallies. Before today, U.S. stocks since late December are up the most since July 2009. Oil prices have risen more than 20% since Christmas Eve. The research may indicate the money will flow into a wide variety of markets and back out simultaneously, regardless of fundamentals. Stocks are seen opening lower this morning, halting the recent rally

A continuation of below-normal rainfall is expected across central and northern Brazil the next two weeks, but more rains are added to a wider area of southern Brazil reducing dryness concerns in some areas. Heavy rain and thunderstorms may increase flooding in Argentina, mostly in northern areas and into southern Rio Grande do Sul in Brazil. Weather forecast is little changed from Wednesday. 

Corn is seen steady after failing to rise above resistance earlier this week on threatening South America weather and hopes China agreed to buy U.S. corn. Brazil farmers may harvest 91.189 million metric tons (MMT) this year, the government agency Conab said Thursday. That’s up from 91.101 MMT forecast in December and 80.785 MMT produced in 2018.

Soybeans seen in a holding pattern waiting for details on the quantities of U.S. farm goods China agreed to buy at this week’s meeting. Brazil’s Conab forecast this year’s soybean crop at 118.8 MMT, down from 120.066 MMT and below the 119.281 MMT harvested a year ago. This is the first time in seven years the crop will fall short of a record. Brazilian soybean exports jumped 22.6% in 2018 to 82.9M metric tons, according to the country's National Association of Grain Exporters; the trade dispute between the US and China has boosted demand, and prices, for Brazilian soybeans. Malaysia palm oil inventories at the end of 2018 rose to a record high, government data Thursday showed. Palm oil futures fell overnight.

Wheat futures seen weaker to start after Egypt skipped over U.S. supplies in its tender Wednesday. Still, increasing wheat tenders this week suggest buyers are looking to extend coverage as world prices continue to rise from their October lows. Jordan retenders for 120,000 MMT of optional-origin wheat Thursday after yesterday passing on offers for March and April delivery. Tunisia and Morocco are also shopping. That follows Egypt buying 420,000 MMT of Russia wheat on Thursday and Algeria buying 550,000 with at least 120,000 of U.S. wheat. 

Livestock Calls

Cattle: Steady-weak

Hogs: Steady-firm

Cattle futures seen consolidating recent gains waiting to see if packers bid more for live cattle supplies as showlists taper and beef prices remain soft.  Wholesale beef prices were down 14 cents for Choice and 79 cents softer for Select cuts. Movement continued good.

Hog futures seen steady to higher after Cash hog bids strengthened for a 10th consecutive day on Wednesday, with the average national direct price up another $1.02. The CME lean hog index firmed 25 cents, the fifth consecutive day of strength.

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