Ahead of the Open: Buckling Up Ahead of USDA Reports This Morning

Posted on 11/08/2019 8:00 AM

Grain Calls

Corn: Down ½ cent to 2 cents
Soybeans: Down 1 to 3 cents

Wheat: Down 1 to 3 cents.

 

General Comment:  Soybeans are giving back some of Thursday’s strong gains amid uncertainty about the details and timing of a U.S.-China trade deal. Corn and wheat continue to slump amid ongoing concerns about demand. While USDA’s yield and acreage estimates  later this morning will largely put U.S. supply debates to rest until the final crop summary in January, the markets’ weakness this week suggests most traders do not expect any major bullish surprises.


China imported 6.18 million metric tons (MMT) of soybeans in October, down 24.6% from 8.20 MMT in September,  and 10.7% smaller than a year ago, figures from the General Administration of Customs of China showed. Imports of vegetable oils in October were 912,000 MT, up 8.6% from the previous month. However, in the monthly government forecast on Friday, China raised its estimates for soybean imports in 2019-20 by 2.2 MMT to 86.2 MMT from last month, as trade relations with major supplier United States improved, and on future diversification of its sources of imports.

Overall Chinese exports fell 0.9% in dollar terms in October from a year earlier while imports fell 11.3%. That’s a sign the exports are at least stabilizing as China sell more to Asian nations and Europe.


The U.S. and China both said that a phase-one agreement would feature pledges to roll back tariffs on each other’s goods in stages. Still, nothing’s certain, including where to sign any deal. An agreement between the United States and China to roll back existing tariffs as part of a 'phase one' trade deal faces fierce internal opposition at the White House and from outside advisers, multiple sources familiar with the talks told Reuters. The idea of a tariff rollback was not part of the original October “handshake” deal between Chinese Vice Premier Liu He and U.S. President Donald Trump, these sources said.  There is a divide within the administration over whether rolling back tariffs will give away U.S. leverage in the negotiations, the sources said.    

China is also pushing for trade pact that includes nations across Southeast Asia, Japan, South Korea, Australia and New Zealand. But not India, which dropped out this week amid domestic protests against the agreement. While losing the world's second-biggest nation by population will leave a bruise, Beijing's motivation for sealing the Regional Comprehensive Economic Partnership remains in tact. The deal should help to buffer some of the export losses from the trade war with America and could also strengthen Beijing's regional trade influence.

Forward sales of Argentine corn and soybeans are zooming higher versus last year as growers hedge against possible increases in export taxes under President Alberto Fernandez, who is set to take office on Dec. 10. With nearly half of this year's corn already sown, and soy planting recently begun, farmers have sold 12.4 MMT of corn and 7.2 MMT of soy versus 4.6 MMT and 2.9 MMT, respectively, at this point last year.

Ocean freight rates for shipping bulk grains fall to their lowest levels in 12 weeks, the USDA says in its Grain Transportation Report. The rate is currently $49.50 per metric ton, the USDA says, which is a 2% decline from last week, although still 5% more than the start of the year. It's the lowest rate for shipping from the Gulf since early August; lower rates to export grain may make US exports more desirable, but the USDA doesn't believe the price will stay low for long.

USDA daily export sales reporting services said private exporters sold sales of 270,000 MT of soybeans for delivery to unknown destinations during the 2019-20 marketing year; and 217,040 MT of corn for delivery to unknown destinations during the 2019-20 marketing year.

 

Corn: December corn is sitting at prices seen Sept. 30 before USDA surprised the markets with smaller quarterly inventory report. Charts are weak and funds are short and that will require a bullish USDA corn crop forecasts later this morning to turn around the market.

 

Soybeans: January beans tried to rally overnight but could not generate much followthrough buying to the outside day up bullish reversal on Thursday. Nonetheless, soybean crush margins are up about 7 cents this week and the oil share of the crush is up about 1 percentage point to 34% as products have outperformed soybeans this week. That’s a positive sign for improved crush and demand for soybeans.

 

Wheat: Futures will likely follow the lead of the corn markets after the USDA data later this morning.  

Heavy rains in some areas of the European Union has disrupted both the harvest of the region’s corn and sugar beet crops and disrupted planting of winter grains like winter wheat and barley

 

Livestock Calls

 

Cattle: Steady to firm
Hogs: Steady to lower

Cattle:  Boxed beef values extended their impressive rally yesterday, with Choice rising $1.15 and Select gaining $1.49. The spread between the two remains wide at $25.27 and signals feedlots remain current on Marketings. Cash cattle trade got underway between $114 and $116 yesterday in the Iowa and Nebraska cash markets, but locations farther to the south have yet to see active trade with some looking for steady to weak bids.  

Hogs:  Hog futures will remain anchored by weak cash bids. Cash hog bids slipped 23 cents on a national average basis on Thursday. Wholesale pork cutout values slipped 30 cents, mostly on weakness in hams. Sales were moderate. Slaughter is already 70,000 head larger than a year ago during the first four days of the week. Look for underlying support from anticipation of more Chinese buying of U.S. pork in the weeks ahead to boost supplies ahead of the holidays in late January. Green Common, the Hong Kong-based provider and retailer of meatless meat products, is hoping to capitalize on depleting inventories and rising prices of pork in mainland China with the launch new products.

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