Ahead of the Open: Weekly Grain, Soybean Sales Disappoint Market Bulls; Pork Exports Soar

Posted on 04/11/2019 8:08 AM

Grain Calls

Corn: Steady to down 1 cent

Soybeans: Down 2 to 3 cents

Wheat: Up 2 to 6 cents

General Comment: Corn and soybeans sliding slightly lower on rising crop forecasts in Brazil, a stronger U.S. dollar reducing the U.S. competitive position in global grain trade and weakness in the energy markets today. Weekly export sales were disappointing for grains but explosively bullish for the hog market.  However, look for corn and soybean prices to find light support from further signs of progress on the China trade talks and continued wet, cold weather forecasts. Wheat is leading the bullish response to the wintry weather and flooding concerns across the northern Plains. 
China's Commerce Ministry said that senior trade negotiators from the United States and China discussed the remaining issues in a phone call following the last round of talks in Washington. China sweetened an offer to open its cloud-computing sector to foreign companies, in a bid to forge a trade deal after U.S. negotiators rejected an earlier proposal as inadequate; Chinese negotiators revised an earlier offer on cloud-computing access, proposing to issue more licenses that businesses need to operate data centers and to lift the 50% equity cap that limits ownership for certain foreign cloud-service providers. U.S. Treasury Secretary Steven Mnuchin told CNBC on Tuesday that U.S.-China trade talks continue to make progress and the two sides have basically settled on a mechanism to police any agreement, including new enforcement offices. However, Mnuchin declined to comment on when or if U.S. tariffs on $250 billion worth of Chinese goods would be removed.

Much of the 42 percent surge in crude this year has been driven by supply concerns, with OPEC’s production cuts, Iran sanctions and fighting in Libya all clouding the outlook for production. This morning the International Energy Agency warned in its monthly report that falling demand could become a bigger issue for the rest of the year, saying the “risks to demand are to the downside” as it sees threats to global growth.

Blizzard conditions end today in Nebraska but will continue into Friday in Minnesota, South Dakota, Wisconsin and southeast North Dakota. Moderate to strong systems move through the central U.S. every three to five days over the next two weeks, producing widespread coverage of near- and above-normal precipitation with highest totals in the Corn Belt and Delta. Flooding and fieldwork delays will continue to expand. Temperatures will be chilly over much of the next two weeks and may continue into early May. Meanwhile, in central and southern Brazil, some drying of second-season corn is being monitored and dryness in Europe and the Black Sea also gaining attention.

USDA did  not report any new large daily sale this morning.

Corn market is seen slightly weaker on sluggish weekly export sales. That increased the importance of the weekly closes for corn market direction. USDA reported this morning the private exporters sold 548,000 metric tons in the week ended April 4, that was below the 600,000 to 950,000 MT expected by traders and 18% below the prior four-week average.  Brazil’s government forecasting agency raised its corn production forecast to 94.008 MMT, up from 92.807 million estimated in March and up from 80.709 MMT last year

Soybean futures seen weaker on a small increase in the Brazil government crop forecasts and weaker export sales. Exporters sold just 270,400 MT last week, down 76% from the prior four-week average. Sales fell far below the 800,000 MT to 1.15 MMT expected by traders and there were no new Chinese sales reported.  Brazil seen harvesting 113.823 MMT this year, up from the March estimate of 113.459 MMT and down from 119.281 MMT last year, Conab said this morning.   

Wheat futures are led to the upside by the spring contracts on weather concerns. Strategie Grains cut their 2019-20 EU wheat crop forecast to 144.8 MMT from 146.1 MMT a month ago because of dry weather. Production still forecast up 14% from a year ago. Weekly USDA exports sales were a disappointing 273,000 MT, down 37% from the prior four-week average.  

Livestock Calls:

Cattle: Steady

Hogs: Steady to weak

Cattle futures seen firm, reversing Wednesday’s declines. Most cash trade this week is steady to only slightly better than a week ago despite this week’s blizzard across the northern production belt. That has been disappointing. But fresh beef prices are on the rise with Choice gaining 73 cents on Wednesday, back challenging the March highs. Select rose 82 cents and beef sales were active yesterday. This morning’s weekly export sales report showed 11,800 MT sold last week, down 28% from the four-week average.

Hog futures seen opening firmer this morning after a strong recovery after pushing sharply lower early on Wednesday. The reversal pattern will gain momentum today after USDA reported 90,700 MT of pork sold for export last week, including 77,700 MT sold to China. Sales were the second highest behind the July 31 weekly total of more than 254,000 MT.  Prices also will gain support by another 47-cent gain in the national average cash hog prices and an 83-cent rise in the pork cutout value to the highest since July.  China’s consumer price index (CPI) climbed for the first time in nine months in March as pork prices jumped 5.1% from year-ago in March as African swine fever is tightening supplies of the meat. The global pork market is set for a sizable jolt in the near term as African swine fever is set to reduce China's pig production by 134 million pigs on the year, roughly the size of the entire U.S. market hog herd.  According to USDA estimated the Chinese pig crop in 2019 will fall to its lowest levels in 17 years.

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