Ahead of the Open: Weaker Start Expected in Grain, Soy Futures Today

Posted on 11/26/2019 8:08 AM

Grain Calls          

Corn: 1 to 2 cents lower
Soybeans: 1 to 2 cents lower
Wheat: 2 to 6 cents lower

 

General Comment:  Chinese and U.S. officials held phone call this morning to discuss key Phase 1 concerns. China’s Vice Premier Liu He, U.S. Trade Representative Bob Lighthizer and U.S. Treasury Secretary Steven Mnuchin agreed to continue communication about an agreement, according to China’s Ministry of Commerce. The officials “discussed how to address respective core concerns, reached consensus on solving related problems, and agreed to keep communication for the remaining matters in the ‘Phase 1’ trade negotiations,” the ministry said in a statement. There was something different about the most recent phone call between Chinese and U.S. officials. It included China’ Commerce Minister Zhong Shan, the Governor of the People’s Bank of China Yi Gang, and Vice Chairman of the National Development and Reform Commission Ning Jizhe. Observers say that indicates increased high-level involvement – a potential positive sign.

 

USDA reported corn harvest advance just eight percentage points to 84% complete as of Sunday. That means there were still nearly 13.1 million acres of corn yet to be harvested. Soybean harvest was 94% complete as of Sunday. Several rounds of wintry weather are headed toward the northern Corn Belt states, which will create even more harvest issues.

 

USDA’s final winter wheat crop condition report of the fall showed 87% of the crop had emerged. Winter wheat crop ratings remained at 52% “good” to “excellent.” 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 climbed just over a point to 347.0 points, while the SRW crop edged just over a point lower to 338.8 points. The final crop ratings of the fall show the HRW crop is rated just shy of a point under last year at this time, while the SRW wheat crop is roughly 11 points under year-ago.

 

Corn: The corn market has been stuck in neutral the past week. After a month of price declines, that’s not the worst thing for bulls. But the market must find some bullish news to fuel a move up. Otherwise, the pause is likely the precursor to the next leg down. Fresh news is limited today and some traders will head out early for the Thanksgiving holiday, so we anticipate light price action with a lower tone, similar to overnight trade.

 

Soybeans: Funds continue to trim their net long position, as weather in South American is improving. While there appears to be positive movement on the trade front with China, traders are taking a wait-and-see approach. The mildly lower price action from overnight is likely to continue today.

 

Wheat: Monday’s big price rally was met with profit-taking overnight. We anticipate that will continue on the open this morning. Wheat doesn’t have the strength to carry the load by itself and there isn’t any fresh supportive news that wasn’t in the market on Monday.

 

 

Livestock Calls

Cattle: Steady/firmer
Hogs: Mixed

Cattle: Both live and feeder cattle rallied sharply Monday, though contracts backed off highs into the close. We still expect followthrough buying this morning, though that is likely to be limited by premiums live cattle futures hold to the cash market. December live cattle finished yesterday nearly $4 above the average cash price from last week’s trade. It’s unlikely traders will want to build in much more premium until it’s clearer if the cash market will strengthen again this week. Given Thursday’s holiday, feedlots and packers may look to wrap up cash trade early. A strong boxed beef market Monday and hefty packer cutting margins should tip the scales in favor of feedlots again this week.

Hogs: Hog futures posted two-sided trade for a third straight day on Monday. We anticipate more choppy price action today. With futures trading above the cash market, the upside is limited until there’s a confirmed China trade deal. While Chinese news reports signal progress in Phase 1 talks is being made, traders have seen previous upswings in trade talks fail to materialize into a deal, so they are going to take a cautious approach. The $2-plus premium December hogs hold to the cash market is likely sufficient for now, even with a winter storm headed for the upper Midwest. The average national direct cash hog price was 3 cents lower Monday.

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