Ahead of the Open: Higher Open Expected

Posted on 09/04/2019 8:14 AM

Grain Calls


Corn: Steady to 1 cent higher
Soybeans: 3 to 5 cents higher.
Wheat: 1 to 3 cents higher.


General Comment: Dorian was downgraded to a Category 2 storm yesterday after it pummeled the Bahamas. The National Hurricane Center projected Dorian will “move dangerously close to the Florida east coast and the Georgia coast tonight. The center of Dorian is forecast to move near or over the coast of South Carolina and North Carolina Thursday through Friday morning. North Carolina’s agriculture department is warning producers that Dorian could cause heavy losses of livestock and crops ready to be harvested. The state temporarily suspended trucking limits for transporting ag products.


USDA’s crop conditions Tuesday afternoon showed “good” to “excellent” ratings for corn improved a point to 58%, while soybean ratings were unchanged at 55%. More importantly, the data showed both crops remain well behind normal development with 19% of the corn crop not yet in dough stage and 14% of the soybean crop not yet setting pods. Crops need a warm, sunny fall to get to maturity. Forecasts call for multiple rain events the next two weeks, which means there will be plenty of cloud cover and limited sunshine. It also means temps won’t be as warm as what’s needed.

USDA reported no daily export sales.


Corn: Futures posted mild corrective gains overnight after Tuesday’s washout to new lows. Funds pumped more money into the short side of the market yesterday, increasing their net-short stance. But barring a September frost/freeze threat, it appears there’s little incentive for funds to cover short positions. While much of the farmer focus is on the late-maturing crop, poor demand is keeping funds comfortably short – and willing to add to their shorts.   

Soybeans: Soybeans fought a good fight yesterday in the face of pressure on corn and traded solidly higher overnight. Weekly export inspections Tuesday were very strong. And crush data for July was record-large. Even with all the damage to demand from the trade war with China, soybeans are finding some demand support. The problem is the upside is limited to corrective buying as funds aren’t likely to aggressively cover short positions unless there’s a September frost/freeze threat for the Corn Belt.


Wheat: Futures mildly bounced back overnight from Tuesday’s poor performance. That is expected to lead to a firmer start this morning. But we have no confidence in wheat being able to sustain buyer interest for long, as much of the market commentary is centered on ample global supplies and expectations export demand for U.S. wheat will increase later in the 2019-20 marketing year.


Livestock Calls


Cattle: Mixed
Hogs: Higher


Cattle: Live cattle futures posted modest gains Tuesday on spillover from feeder cattle and the hog market. We don’t anticipate the same spillover support today, so price action in live cattle is likely to be choppy as traders await influence from the cash cattle market. If Tuesday’s wholesale beef trade is any indication, lower cash cattle prices could be in store this week as boxed beef prices were moderately to sharply lower and movement was light at just 77 loads. But packer margins are still extremely strong and, therefore, we can’t rule out a firmer tone in the cash market. Traders are likely to wait until the cash market starts to strengthen before they are active buyers of futures, even with the discounts futures hold to the cash market. Based on overnight trade, feeder cattle futures won’t have support from weaker corn futures this morning, which will likely curb followthrough buyer interest.

Hogs: October lean hog futures finished limit up yesterday, meaning there will be expanded trading limits of $4.50 for hog futures today. Followthrough buying is expected on the open this morning, but we don’t anticipate the market will test the daily limit to the upside. In fact, a firmer start could attract some profit-taking as the cash market continues to weaken. The average national direct cash hog price softened another 35 cents Monday. But the product market was strong as the pork cutout strengthened $3.34 on the heels of strong gains in all cuts and movement was solid at 333.87 loads. Seasonally, retailers should be buying pork to feature for national pork month in October.


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