Ahead of the Open: Grains, Soy Hold Support and Wait for USDA Data, China Trade News

Posted on 11/06/2019 7:50 AM

Grain Calls

Corn: Up 1 to 2 cents
Soybeans: Steady to up 2 cents
Wheat: Down 2 cents to up 2 cents.

General Comment:  Grains and soy seen holding a steady to firmer undertone waiting for USDA’s Crop Production and World Supply and Demand Reports on Friday. Funds have probably increased net-short bets to more than 100,000 contracts and are betting on no bullish supply surprises on Friday.  Funds are slightly low soybeans, more confident of a cut in U.S. soybean yields and production. News is limited and price changes will continue small before Friday’s reports.   Harvesting will slow with more snow the next 48 hours from the Dakotas to New York. More than 6.6 billion bushels of corn were still left to harvest as of Sunday. The longer crops remain in the fields, the greater for additional field losses. Better conditions will exist to the south. Rains condition to provide more favorable conditions for crops in Brazil but the outlook in Argentina is drier into December and a risk for both corn and soybeans. 

The markets continue to wait on China trade deal updates and timing for a signing of Phase 1 of any agreement.  Next week’s trip to Brazil by Chinese President Xi Jinping may come too soon for him to sign a Phase 1 trade deal with the U.S., the South China Morning Post reports, with work continuing on the details of the agreement. Xi is due to attend the Brazil summit alongside leaders from the host country, Russia, India and South Africa on Nov. 13 and 14. The paper said that one of the ideas was for Xi and his American counterpart Donald Trump to hold a summit in the U.S., but China would not agree to it. Meanwhile, Phase 2 talks may start, but may not end unless Trump wins re-election, according to some China watchers.

COFCO to buy $100 million of Danish porkChina’s state-owned ag conglomerate COFCO has agreed to purchased $100 million worth of pork from Danish Crown, Europe’s top pork producer, by the year 2020. China is scrambling to bring in pork as prices have soared to record levels as supplies dwindled due to an outbreak of African swine fever.  For reference, the U.S. exported more than $102.8 million worth of pork to China during September and $721.7 million worth of the product the first nine months of the year, according to the U.S. Meat Export Federation.  

The European Union and China have agreed to protect 100 European regional food designations, known as geographical indications (GI), in China and 100 Chinese geographical indications in the EU, the EU Commission said on Wednesday. The deal will protect the names of such products as cava, Irish whiskey, feta and prosciutto di Parma, as well as China's Pixian bean paste, Anji white tea and Panjin rice. The deal significantly expands the number of foods protected by GIs from the 10 products on both sides that were agreed in 2012 and should help boost trade in higher-value goods. Consumers are willing to pay more for GI products, trusting the origin and authenticity of the goods. But the agreement needs to be accompanied in China by updated laws and stronger enforcement, the European Union Chamber of Commerce in China said in a statement.

Republicans say costs a hurdle to bipartisan tax deal, including extension of lapsed biodiesel tax incentive. GOP leaders said House Democrats are asking for too much in return for movement on a bill to renew 30-plus tax breaks known collectively as extenders

Brazilian farmers plan to start a campaign next week to end a ban by trading firms on buying soybeans from parts of the Amazon rainforest cleared after 2008, leaders from a major farmer group told Reuters, citing support from President Jair Bolsonaro.  The push to end traders' voluntary "soy moratorium" — one of the farm industry's most high-profile efforts to preserve the Amazon — comes despite mounting global pressure on Brazil to protect the environment from its expanding farm frontier.

USDA daily export sales reporting services said private exporters did not report any new large sales.

Corn: December corn opened slightly higher and continues to hold in the green this morning but well contained inside of Tuesday’s price range. Prices tested key underlying support at the October low at $3.78 ¼, Touching $3.80 ½ yesterday.

SoybeansJanuary beans seen holding this week’s sideways trend after last week testing underlying support near $9.25.   

Wheat: Futures rebounded on positioning for a slightly smaller world crop in Friday’s USDA global supply and demand updates. Australia wheat production may fall to 15.54 MMT, about 19% lower the nation’s official estimate of 19.2 MMT, according to a poll of clients by INTL FCStone.  USDA, which updates is crop forecast on Friday, estimated the crop at 18.0 MMT last month.

Livestock Calls

Cattle: Steady to mixed
Hogs: Steady to slightly firmer

Cattle: Boxed beef values continue to march higher. Choice boxed beef values rose another $1.24 on Tuesday, up $5.50 from week-ago levels. Select slipped 56 cents Tuesday, but it is also up a solid $6.25 for the week. The market is optimistic cash prices will rise again this week, but futures already hold a pretty healthy premium to last week’s cash action around $113. The more than 20% rally the past two months with few setbacks suggest a more sideways trade is likely to correct the overbought conditions. Underlying beef demand remains special.

Hogs:  The pork cutout value rose 75 cents on Tuesday after surging $3.11 to start this week. Sales continued to be active and will likely give the market a boost on Tuesday. However, gains will be limited by futures large premium to the cash markets, which fell again on Tuesday. The national average price fell 73 cents, USDA data showed. The market is hoping for fresh Chinese buying in Thursday’s weekly USDA update after reports China lifted its ban on Canadian pork and beef imports to boost meat supplies curtailed by African swine fever.

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