Ahead of the Open: Time for a Pause to the Bear Trends Amid Firm Cash Markets

Posted on 11/19/2019 7:45 AM

Grain Calls          

Corn: Steady to up 1 cent
Soybeans: Up 2 to 3 cents
Wheat: Steady to up 1 cent

General Comment: Corn, soybeans and wheat are due at minimum a short-term bounce after recent losses and touching underlying chart support on Monday. Slow corn and soybean harvest progress and firming cash bids add to the short covering activities.

Look for basis to remain firm and provide some renewed support to the corn and soybean markets as harvest continues to drag on with more rain and snow in the forecast. Grain bids are moving higher on tightening supplies with many growers sitting on fresh government money to pay bills. Weather and a lack of propane to dry harvested crops slowed the advancement in corn harvesting to 10 percentage points to 76% complete as of Sunday, USDA reported Monday. The five-year average pace is for 92% of the crop to be harvested at this point in the season. Soybean harvest was 91% complete, a six-point gain for the week and four 

percentage points behind the five-year average for this time of the year.  As of Nov. 18, MFP 2 payouts totaled $6.9 billion, including $6.6 billion for non-specialty crops, $69.7 million for specialty crops, and $252 million for livestock.                                                                       

The U.S.-China trade talks continue bog down on specifics. Phase 1 talks continue to focus on getting China to commit to a specific dollar amount and farm products that Chinese negotiators have balked at in the past, the New York Times reports. Initial Phase 1 talks has both sides agreeing on a $20 billion farm product shopping list, but President Donald Trump told his negotiators to set the figure three times that mark, and then settled on a range of $40 billion to $50 billion. Chinese agricultural imports from the U.S. peaked at $29 billion in 2013, with over half being soybeans.

Speculation rose yesterday that Trump may be getting worried about getting a deal and wants to make sure the Federal Reserve has his back with low interest rates to boost employment and stock prices going into the start of the election cycle in early 2020. Fed Chairman Jerome Powell told the President during an unexpected White House meeting on Monday that the central bank will continue to make monetary policy in a “non-political” manner. The models run by the Federal Reserve Bank of Atlanta and Federal Reserve Bank of New York both lowered their forecasts of fourth-quarter gross domestic product growth to just above 0%. The Atlanta Fed’s model is now predicting growth of just 0.3%, while the New York Fed’s model is forecasting 0.4% growth.

China is watching proposed U.S. Senate legislation dubbed The Hong Kong Human Rights and Democracy Act. If passed and signed by Trump, that could complicate efforts by Washington and Beijing to negotiate a final settlement to their long-running trade war.

Brazil's real posted its lowest ever close of 4.2061 per dollar on Monday, as heavy selling met no resistance from the central bank at a key market level where it had intervened earlier this year. The weak real remains a negative for U.S. corn and soybean export outlooks. Corporate demand for dollars helped push the local currency lower. The wider backdrop is also broadly negative for the real amid record low and falling interest rates, disappointingly weak inflows from abroad at a recent oil mega-auction, and an unnerving regional and domestic political landscape.

Teamsters Canada said on Twitter that about 3,000 workers at Canadian National Railway went on strike early this morning as both sides failed to resolve issues in contract negotiations. The union had issued a 72-hour strike notice over the weekend as talks reached a stalemate. This could temporarily cripple supply networks for grain at a critical time when the harvest is completed and railroads ship thousands of grain cars to the West Coast of Canada weekly for export markets. It could open some business for U.S gain and oilseed supplies. 

Wheat prices remain supported by rising Russian wheat prices and sluggish exports. Between July 1 and Nov. 14, Russia has exported 19.4 MMT of grain, according to the country’s ag ministry, citing customs data. That’s well under the 22.6 MMT of grain the country shipped last year during the period. Russia's VTB bank VTBR.MM, which is expanding in commodities in a bid to create a national grains champion, will exit the sector once it has built up the assets in the next few years, its CEO told Reuters. Andrey Kostin also said in an interview that VTB plans to start trading wheat via its Swiss operation and that it is in the final stage of talks to purchase half of the Taman grain terminal on the Black Sea.                                                             

USDA daily export sales reporting service said private exporters sold 191,000 metric tons of corn for delivery to unknown destinations during the 2019-20 marketing year. That follows a 132,000-metric-ton sale announced Monday to unknown destinations.


Corn: December corn has broken below both the 50% and 62% retracement levels of the fall rally. The market is oversold but not yet showing a bullish chart pattern that might switch the funds away from their aggressive sell modes. Time for a pause in the downdraft.  

SoybeansJanuary beans open slightly higher after falling to seven-week low on Monday at $9.10. Futures also completed a 50% retracement of the fall rally and is trading this morning back above the 100-day moving average. Followthrough strength into week’s end is needed to turn the market back in the bull’s favor.

Wheat: Futures look poise to try build on the bullish outside day up reversal on Monday SRW futures. Winter wheat planting advanced three percentage points over the past week to 95% complete, which was right in line with expectations and the five-year average. When USDA’s weekly crop condition ratings are plugged into the weighted Pro Farmer Crop Condition Index (0 to 500-point scale, with 500 being perfect), the HRW wheat crop dropped 4.6 points to 345.9 points and the SRW crop dropped 1.8 points to 339.9 points. The HRW crop is now rated below year-ago for the first time this fall and is more than 9 points below its five-year average. The SRW crop is now 32.5 points below its five-year average.

Livestock Calls

Cattle: Steady to weak
Hogs: Steady

Cattle:  Cattle are seen steady to weaker today failing to hold early gains yesterday and ending mixed for the session. Prices will be pressured by the weakness in Choice cutouts Monday, which fell $1.68 while select was up $1.26. The spread narrowed to $23.53 on Monday on light to moderate sales. Slaughter fell to 118,000 head, down from 120,000 a year ago. Last week’s estimated beef production rose to 540.2 million lbs., up from 535.3 million lbs. a week earlier and a year ago. Weight held steady at 824 lbs. from a week ago and still 3 lbs. less than a year ago. The biggest negative in the short term is the rate of growth in fund longs positions. Funds increased net-long futures and options positions 12,885 contracts to 73,714, rising for a seventh straight week from a net-short position of about 6,000 contracts on Sept. 24.

Hogs:  Lean hog futures seen steady, paring back some of Monday’s losses. Wholesale pork cutout values rose $1.01 to $89.14 on Monday on light to moderate business. That’s near the two-year peak at $90.44 reach on Aug. 8. Hams lead gains rising back near the five-year high reached last week with ribs rising to the highest since May with picnics reaching new 4 3/4-year highs. Slaughter continues near record levels, up 15,000 head from a year ago and a lid on rallies until pork cutout pushes cash bids higher. The national average prices slipped a dime on Monday.





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