Ahead of the Open: Wheat Leads on Rising World Prices; Corn, Soy Gain on Smaller Crop Speculation

Posted on 10/17/2019 7:52 AM

Grain Calls

Corn: Up 1 to 3 cents
Soybeans: Up 2 to 5 cents
Wheat: Up 3 to 7 cents

General Comment:  Wheat is leading to the upside. The market’s upside move is gaining momentum amid fund short covering as prices take out buy-stops. Global supplies are shrinking but remain at record levels. World prices are leading and that may help to bring buyers into the market to cover additional forward needs. Corn and soybean futures are back into a positive mode today after a couple of days of consolidation as smaller crop ideas and movements toward a China trade deal are providing the boost.

The U.S. Department of Agriculture will collect additional information on harvested acreage of corn and soybeans in Minnesota and North Dakota following recent snowfall in both states, the government said in a statement on Wednesday. If warranted, the USDA's National Agricultural Statistics Service said it would publish any changes to the harvested acreage figures for those states in its Nov. 8 crop production report. That has increased talk that damage was more extensive, and prices are adding some additional weather premium.
Weather has been drier this week and harvesting in quickly ramping up. Yield reports remain variable enough that the overall smaller crop narrative remains intact.
South America weather leans a little negative with some forecasts showing more rain in Brazil the next 10 days to begin to ease soil moisture shortages. Parts of western and southern Argentina still need more rain. 

European Commission President Jean-Claude Juncker says a new Brexit deal has been reached. The pound surged higher on the announcement pushing the U.S. dollar lower on the world currency markets and global stocks rallied. With an agreement now reached in Brussels, attention will turn to Westminster on Saturday to see if the deal can pass a parliamentary vote. The uncertainty over parliament's approval means that, two weeks before the latest date for the United Kingdom's departure from the world's largest trading bloc, the possible outcomes still range from an orderly departure to a chaotic exit or even another referendum that could reverse the entire endeavor.

China hopes to reach a phased agreement in a protracted trade dispute with the United States and cancel tariffs as soon as possible, the Commerce Ministry said on Thursday, adding that trade wars had no winners. A phased agreement would help restore market confidence and reduce uncertainty, ministry spokesman Gao Feng told reporters, adding that both sides were maintaining close communication. "The final goal of both sides' negotiations is to end the trade war and cancel all additional tariffs," Gao said. "This would benefit China, the U.S. and the whole world. We hope that both sides will continue to work together, advance negotiations, and reach a phased agreement as soon as possible."  
China says its officials continue to work on the text of an agreement on trade with U.S. negotiators, even as the diplomatic situation seems to be deteriorating. China's Ministry of Commerce confirmed that the nation would step up purchases of U.S. agricultural products as the two sides are working on the text of an initial agreement, but it stopped short of giving details on how much it would buy.
U.S. and Chinese trade negotiators still have work to do on a "phase one" trade agreement ahead of a targeted signing by U.S. President Donald Trump and Chinese President Xi Jinping next month, U.S. Treasury Secretary Steven Mnuchin said Wednesday.

USDA’s daily export sales reporting agency said U.S. exporters did not report any new large sales in the past 24 hours.  Traders continue to look for signs of new Chinese purchases beyond the goodwill buying ahead of the trade talks leading up to the verbal agreement last week.

Corn: December corn is building on Wednesday’s late recovery. A move above Monday’s spike high at $4.02 ½ targets a second test of the 100-day and 200-day moving averages.

SoybeansNovember futures moved back above the $9.30 pivot point after closing below it on Wednesday. Key resistance is Monday’s high at $9.45 ½. 

Wheat: The wheat market is highs as world prices rise. Egypt purchased 285,000 MT of wheat from Russia, 60,000 MT of wheat from France and 60,000 MT of wheat from Ukraine. Prices were about $10/ton higher than the prior purchase two weeks ago. Saudi Arabia’s state grain buyer is seeking 595,000 MT of wheat in a tender.

Livestock Calls

Cattle: Steady-higher
Hogs: Steady-higher

Cattle: Futures seen adding to Wednesday’s gains to start this morning. Beef prices were narrowly mixed yesterday with Choice up 26 cents and Select slipping 11 cents. Sales were moderately active. Cash cattle bids were firm on a light test Wednesday.

Hogs: The market’s volatility continues to expand. Limit up Tuesday and sharply lower Wednesday may yield to strong gains today. The story remains record supplies versus expectations for Chinese purchases. This morning, the Chinese leans positive after Tyson Foods announced it will stop buying U.S. hogs raised with ractopamine to boost sales to China. That is a sign Tyson expects the outbreak of African swine fever will last much longer than they expected. Pork prices in China have more than doubled and cover tariffs on U.S. pork that run as high as 70%. A Chinese official today said hog production capacity should bottom out this year, forecasting a return to usual pig numbers in 2020. Most analysts and market watchers question that ambitious forecasts with the disease still spreading and more 40% of the herd officially lost. Slaughter the first three days of this week is up 8,000 head from a week earlier and 53,000 head more than a year earlier. Cash hogs were mixed with the average national prices down 40 cents with Iowa/Minnesota up 47 cents. Wholesale pork cutout values slumped 34 cents, mostly in response to weakness in bellies.

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