Ahead of the Open: Small Upside Correction Ahead of USDA Aug. 12 Report

Posted on 08/08/2019 8:00 AM

GRAIN CALLS:

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

General Comment: Corn and soybeans edged higher overnight up near the first levels of resistance with traders positioning for the USDA Crop Production Report on Monday.

The U.S. Midwest weather forecast had no major changes over the next 10 days with below average rainfall, especially in the east with temperatures average to below average. Scattered rain will stay in the Central Plains and southwest Midwest into the weekend. A warmup late next week may a help to trigger some storms in the Midwest but forecasts that far in the future have not be verifying.

U.S. stock index futures pointed to a higher opening on Wall Street as stronger trade data from China and a firmer yuan soothed investor sentiment, propelling equities in Europe and Asia higher. Oil prices rebounded too, helped by expectations that falling prices may lead to more production cuts. The dollar index was little changed, while gold prices slipped from a six-year high touched on Wednesday.

China’s export growth rebounded in July and imports shrank less than forecast, signaling some recovery in trade just as companies brace for the arrival of new tariffs from the U.S. There was also an uptick overnight in the yuan – now the focal point of the U.S./China trade – soothing some nerves. China’s not the problem, according to Trump, who’s once again been berating the Federal Reserve on Twitter. That said, the White House is still rushing to finalize its latest round of tariffs it plans for Sept. 1.  Overall China’s exports unexpectedly rose 3.3% from a year earlier last month, reversing a 1.3% decline in June and the best since March. China’s exports to the U.S. fell 6.5% in July from a year earlier, versus a 7.8% decline in June, customs data shows. Imports from the U.S. fell 19.1% from a year earlier, compared with a 31% drop the previous month.

Meanwhile, Japan granted South Korea the first export license under a stricter monitoring system, lessening fears of disruptions at the world’s largest technology firms.

USDA daily export announcement service said private exporters reported new export sales of 135,000 metric tons (MT) of soybean meal for delivery to the Philippines during the 2019-20 marketing year.

Corn: December futures tested overnight resistance but will be hard pressed to build on gains after weekly export sales proved disappointing. Old-crop sales were just 42,600 metric tons (MT) in the week ended Aug. 1, 82% behind the prior four-week average. New crop sales were 197,000 MT, below the range of trade estimates.  U.S. ethanol production for the week ended Aug. 2 averaged 1.04 million barrels per day, up 0.87% versus a week ago, down 5.45% versus a year ago. Stocks totaled 23.117 million barrels, down 5.52% versus a week ago and up 0.85% versus last year. Corn use for the week was 107.3 million bu. above the 77.8 million bu. needed to meet USDA projections.

Soybeans: November futures are up against overhead resistance and this morning’s weekly export sales will likely provide little fresh buying momentum. Old-crop sales fell 29% from the prior week to 101,700 MT and new-crop sales were 318,300 on new buying from unknown destinations. Sales were in the middle of trade estimates. Meanwhile, China's soybean imports came in at 8.63 MMT in July, the highest monthly total since August 2018, according to data released by the General Administration of Customs on Thursday. That’s up from 8.0 MMT a year ago and 33% higher than June imports. China January to July soybean imports were 46.9 MMT, down from 52.85 MMT a year earlier period. Improved crush margins in May boosted soybean buying.  Malaysian palm oil futures extended gains for the fourth straight session to touch an over three-month high on Thursday.  The September soyoil contract on the Dalian exchange rose 2.2% and the Dalian September palm oil contract gained 0.7%.

Wheat: Futures seen firming with export sales rising 17% above the prior four-week average and near the top end of trade estimates. The U.S. attaché in Argentina is calling for a 2019-20 wheat crop of 20.8 MMT, which is 800,000 MT higher than USDA’s official crop projection and a record, based on a larger planted acreage projection. Ukraine's grain exports have risen to about 4.7 MMT so far in the 2019/20 July-June export season, up from 3.1 MMT at the same time last year, the agriculture ministry said on Thursday. The volume includes 1.9 MMT of wheat, 1.1 MMT of barley and 1.6 MMT of corn, the ministry statement said. Ukraine plans to harvest at least 70 million MT of grain this year, almost the same as it threshed in 2018.  Saudi Arabia's state grain buyer SAGO said that all Black Sea origin wheat and other global origins can be offered in its next wheat tender if crops meet specification requirements. SAGO said on Thursday that it will relax its bug-damage parameters in hard wheat specifications from 0% to 0.5% from its next tender.

LIVESTOCK CALLS:

Cattle: Mixed to firm
Hogs: Steady to weak

Cattle: Futures seen steady to firmer after a rally in beef prices this week. Still cash cattle trade is mixed and will need to lead futures higher. Weekly beef export sales in the week ended Aug. 1 rose 94% from a week earlier and were 41% higher than the prior four-week average. Top buyers were Hong Kong, Japan and South Korea. Shipments were up 8% from the four-week average.

Hogs:  Lean hog futures will test the resiliency of Wednesday recovery to start. USDA said pork export sales last week rose 55% from the prior week’s anemic tally but were down 13% from the four-week average. China bought just 1,400 MT last week. Shipments remains relatively active with China the top destination. Average cash hogs fell $1.51 yesterday and pork cutout values were down 33 cents as losses in hams, loins and butts offset gains in bellies, ribs and picnics. Sales were sluggish. Slaughter this week is estimated at 1.376 million head, up from 1.313 million a year ago. China on Thursday confirmed a new case of African swine fever in south China's Guangxi Zhuang Autonomous Region. The disease was detected in a truckload of pigs at a highway toll station in the city of Fangchenggang of Guangxi.

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