Ahead of the Open: Quite Trade To Finish the Week

Posted on 09/06/2019 7:48 AM

Grain Calls

 

Corn: Narrowly mixed
Soybeans: 1 to 3 cents higher
Wheat: 1 to 3 cents lower

 

General Comment: Hurricane Dorian was downgraded to Category 1 early today, after initially being labeled the second strongest Atlantic hurricane on record. The coastal Carolinas are forecast to get 6 to 12 inches of rain, with 15 inches in isolated areas, and a storm surge as high as 7 feet.

Most do not anticipate major breakthroughs in U.S./China talks next month, but some China watchers say important developments could break soon. That includes some sort of agreement for the U.S. to drop some of the tariffs scheduled to go into effect Oct. 1 and for China to finally make an agricultural purchase to satisfy President Donald Trump. But other analysts note that China is preparing to celebrate the 70th anniversary of its founding on Oct. 1, and Beijing would be unlikely to make concessions at such a politically delicate moment. Negative impacts from the prolonged trade war continue to be felt by China’s economy, prompting the People’s Bank of China to cut bank reserve requirements for all commercial banks. That will free up around 900 billion yuan ($126 billion) that banks can use to increase lending in an effort to shore up China’s economy.

Meanwhile, the Trump administration is readying tariffs on over 400 products from the European Union, including foods like cheese, olives, coffee, fruits, pasta pork, wine, liquor, jam, seafood and fish, olive oil and yogurt. The administration is considering tariffs of up to 100% on these products in an attempt to resolve a long-standing dispute over aircraft subsidies.

 

Corn: Futures favored the upside overnight, but buyer interest was limited. The market has struggled to carry corrective buying overnight to the daytime session and weekly export sales were disappointing.  USDA reported net reductions of 165,900 MT for 2018-19 and net sales of 416,700 MT for 2019-20. China had net reductions of 157,500 MT for 2018-19. Weather remains non-threatening for late-developing corn. Temps are expected to cool down mid-month, but forecasts are not calling for an end to the growing season from the cooler air.

Soybeans: Futures recouped a small portion of Thursday’s sharp losses overnight and are expected to open firmer this morning. Weekly export sales were better than expected at 69,400 MT for 2018-19 and 788,400 MT for 2019-20. Exports were also strong at 1.197 MMT, with China taking delivery of 780,400 MT of that total.

 

Wheat: Futures pulled back from gains earlier this week in overnight trade. Weekly export sales won’t help bulls this morning. For the week ended Aug. 29, wheat sales totaled 312,100 MT, which was below expectations of 400,000 to 800,000 MT. Export sales were down 53% from the previous week and 43% from the four-week average.

 

 

Livestock Calls

 

Cattle: Lower
Hogs: Mixed to mostly lower

 

Cattle: Cattle futures worked off session lows into the close Thursday, but still posted downside breakouts from the short-term consolidation ranges that led to new contract lows. As a result, the market is expected to open lower amid followthrough selling. If early seller interest is limited, futures could attempt a corrective bounce, but the upside will be limited by lower cash cattle prices again this week and a sharp drop in wholesale beef prices yesterday.

Hogs: October lean hog futures are expected to open with a weaker tone amid falling cash hog prices. The average national direct cash hog price was $1.28 lower Thursday and the cash market is expected to continue to soften. Given hefty market-ready supplies, packers aren’t having any problems securing needed supplies. Hurricane Dorian will disrupt hog movement and slaughter schedules in North Carolina today and Saturday, though major disruptions are not expected. Deferred lean hog futures are also expected to be mostly weaker on the open this morning, though they have been trading opposite of the lead contract recently.

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