Ahead of the Open: Weekly Export Sales Will Curb Buying in Grain, Soy Markets

Posted on 10/24/2019 8:18 AM

Grain Calls

Corn: Steady to mixed
Soybeans: Steady to up 1 cent

Wheat: Down 1 to up 3 cents

 

General Comment: Look for another mixed day of trading. Corn, wheat and soybean gains overnight are fading after disappointing USDA export sales numbers this morning. Harvest will make progress around rains and cold weather. The market remains focused on U.S./China trade talks but further upward prices movement depends on a deal being signed.

 

This morning’s weekly export sales report will be negative for early trading. USDA reported soybeans sales of 475,200 metric tons (MT) last week, down 72% from the prior four-week average and well below the 800,000 MT to 1.6 milllion MT expected and no new sales to China. Corn export sales last week were up 15% from the four-week average at 491,500 MT but at the low end of trade estimates calling for sales between 400,000 to 700,000 MT. Wheat sales were down 31% from the four-week average at just 262,400 MT and below trade estimates for 300,000 to 600,000 MT.

 

Light rains fell across parts of the northern Midwest during the past 24 hours from South Dakota to Michigan. Heavier rains were noted in Oklahoma and parts of the Southern Plains and that rain moved into the eastern Midwest for the weekend with drier conditions across the western Corn Belt. Temperatures will swing between normal to mostly below normal the next 10 days.  Harvest progress will be variable depending on the location of weekend rainfall.

 

Some recent beneficial rain and cooler temperatures for planting and developing soybeans in Parana and the Mato Grosso Brazil. Some rains will continue into the weekend and coverage and amounts will be very important with the outlook looking drier for the bulk of the Brazilian growing region next week. Rains will be focused over southern Brazil, Paraguay, Uruguay and northern Argentina during the next 7 to 10 days.

 

China plans on buying at least $20 billion in ag products from the U.S. the first year if both sides sign off on Phase 1 of a trade deal with the U.S., according to a report from Bloomberg citing people familiar with the talks. And the country is reportedly open to boosting purchases in future rounds of negotiations. When President Donald Trump announced the partial deal, he indicated China would scale up ag purchases to $40 to $50 billion, but specifics and timeframes were lacking. Speaking on Fox Business Network this morning, White House trade advisor Peter Navarro said Phase 1 of U.S./China deal adopts virtually the entire chapter from the May agreement regarding intellectual property.  

 

USDA reported daily export sales of 264,000 MT of soybeans to China for 2018-19.  

 

Corn: December corn closed fractionally lower but off early session lows at $3.84 on Wednesday.  A close back above $3.93 would open up a potential run at last week’s high and key resistance at $4.02 1/2. Chinese importers are inquiring about potential purchases of American-grown sorghum. Any purchases would be tied to whether imports are economical. China used to be the US’s top importer before tariffs were imposed in 2018.

 

Soybeans: November futures also left behind a selling tail yesterday, closing six cents above the session w at $9.27 ¾. Last week’s high at $9.45 ½ remains key overhead resistance.

 

Wheat: Futures rebounded overnight led to the upside by spring wheat futures on rising international demand for milling wheat. Taiwan purchased for 88,900 MT of U.S. milling wheat. Tunisia purchased 75,000 tons of optional origin soft milling wheat in three 25,000 MT consignments. Turkey's state grain board has provisionally purchased about 127,500 MT of EU red milling wheat. Jordan's state grain buyer has issued an international tender to buy 120,000 MT of optional origin milling wheat  Syria issued a new tender to exchange 100,000 MT of its durum wheat for the same quantity of soft wheat for bread making, after failing to agree on a deal in an initial attempted swap for Russian wheat.  Syria's state grains agency issued an international tender to purchase and import 150,000 mt of milling wheat to be sourced from Russia. Ethiopian government offered and international tender to buy about 600,000 MT of milling wheat. Bangladesh's state agency has issued a new international tender to purchase 50,000 MT of 12.5% optional origin milling wheat.

 

 

Livestock Calls

 

Cattle: Steady to firm
Hogs: Steady to lower

 

Cattle: Live cattle are seen firmer after the December contract’s push to the highest level since early May. Bulls were encouraged by USDA Cold Storage data signaling relatively affordable beef prices during September encouraged strong demand. Boxed beef prices have marched higher this week, which should improve producers’ bargaining power. Some light cash cattle trade started in Kansas, Texas and Nebraska at $109 yesterday, up a buck in the former two states and steady in Nebraska relative to action last week. USDA releases its monthly Cattle on Feed report on Friday.  Weekly USDA export sales showed beef sales rose 6% from a week earlier. Traders are looking for on feed numbers to fall about 1.2% from a year ago on Oct. 1 as placements rise 1.6% in September, according to the average of traders polled by Reuters. The range of estimates is large again this month from down 4.9% to up 7.6%.

Hogs: Futures fell to the lowest price in two weeks and bounced higher. December lean hogs were supported by efforts to keep the contract in line with the cash hog index yesterday, but the rest of the market faced pressure as big kill numbers continue to overshadow signs of big demand. This morning’s weekly export sales report was disappointing and likely will put new pressure on hog futures. USDA said exporters sold 19,200 MT of pork last week, down 80% from the four-week average with China buying just 1,300 MT. Shipments also fell 55% from the prior four-week average with Mexico and China the top two destinations.

 

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