Ahead of the Open: Quiet, Mixed Dealings Ahead of the USDA WASDE Report

Posted on 02/11/2020 6:50 AM

Grain Calls

Corn: Down a penny
Soybeans: Steady-mixed
Wheat: Down 1 to 3 cents.

GENERAL COMMENTS:  Soybeans and corn traded both sides of unchanged overnight and have drifted near session lows at the break. Wheat was defensive all night. All three markets are quiet and stock in narrow ranges ahead of the Today’s USDA supply and demand report. USDA’s monthly supply and demand estimates are expected to factor in the broad goals of the U.S.-Chinese trade deal but not the details of China's purchase commitments. USDA probably wants to see some actual new business completed before making major adjustments to its export forecasts. USDA's first Phase 1 trade deal forecasts for 2020-21 season will be released during the Ag Outlook Forum on Feb. 20-21.

The USDA daily export sales reporting service said private exporters did not report any new large U.S. grain or soybean sales this morning. While not unexpected, that will be a mildly negative factor when futures reopen.

Brazil’s government statistics agency Conab added 1.024 MMT to its Brazilian soybean crop estimate, pushing its 2019-20 estimate to 123.250 MMT, a big jump from last season’s 115.030 MMT crop. Conab made an even bigger hike to its 2019-20 corn crop estimate, raising it from 98.711 MMT in January to 100.486 MMT. That would top last season’s 100.043 MMT crop. The hike largely stemmed from a bigger second-season corn crop estimate. Also of note, Conab’s wheat import forecast edged 200,000 MT higher to 7.0 MMT.

Coronavirus infections in China may be over by April, its senior medical adviser said on Tuesday, but the death toll passed 1,000 and the World Health Organization warned of a "very grave" global threat. As the epidemic squeezed the world's second-biggest economy, Chinese firms struggled to get back to work after the extended Lunar New Year holiday, hundreds of them saying they would need loans running into billions of dollars to stay afloat. Company layoffs were beginning despite assurances by President Xi Jinping that widespread sackings would be avoided, as supply chains for global firms from car makers to smartphone makers ruptured.

World stocks resumed rising towards record highs on coronavirus peak contagion comments on Tuesday and the dollar reached a four-month high. Bloomberg Economics estimates that if the outbreak is successfully contained the impact on growth will be severe but short-lived, with GDP expanding 4.5% in the first quarter before rebounding and stabilizing in the second half of the year. China's inflation leaps to an eight-year high as shutdowns to stop the spread of the coronavirus make it harder to get basic goods including food and toilet paper, while businesses and households hoard whatever they can find.

Today’s Democratic primary in New Hampshire will probably produce a victory for Senator Bernie Sanders while not giving any signs of the party coalescing around a single candidate. There are 24 delegate votes at stake today, a small prize compared with the Super Tuesday vote on March 3. The latest national poll shows Sanders leading, overtaking Joe Biden with former New York Mayor Michael Bloomberg rising to third place.   

Corn: March corn futures were trapped in a 2-cent range overnight and right in the middle of the two-week trading range from $3.75 to $3.85. Green Plains Inc is planning to flip its business model upside down to survive a crash in prices for the corn-based fuel. The company will invest some $400 million in the next two to three years at its 13 plants to make high-protein, corn-based animal feeds its new flagship product, relegating ethanol to a low-margin byproduct. The strategy reflects a devastating ethanol market outlook as U.S. demand for motor fuels is projected to fall and the Trump administration waives biofuel blending requirements for more and more oil refiners. Green Plains will start production of its 50% protein-content feed in February at a plant in Shenandoah, Iowa, following a $35 million investment. The feed, which could run as high as 60% protein content in the coming years, is insulated from the political headwinds that have devastated the ethanol market.

Soybeans: Futures opened higher last night but fell short of challenging Monday’s session high and retreated. The market is cautious about USDA making changes but taking the lead from improved optimism the coronavirus is peaking.

Wheat: Futures are seen following European values lower this morning. Traders also waiting on results from Egypt’s tender for wheat today. Romania wheat was the cheapest offered. The market will remain supported by smaller plantings and upcoming growing season. France’s farm ministry has trimmed its estimate for winter soft wheat sowings by 30,000 hectares, dropping it to 4.7 million hectares. That would be a 5.6% retreat from 2019 sowings,

LIVESTOCK:

Cattle: Mixed to weak
Hogs: Steady to mixed

Cattle:  Cattle futures are seen opening weak after closing lower on Monday. While domestic beef demand has been strong, exports are slowing. The wholesale choice boxed beef cutout value fell $1.21 to $208.91 per cwt on Monday afternoon, while select cuts dropped 19 cents to $203.70 per cwt., USDA data showed. Most are looking for a steady to weaker cash trade again this week after prices fell $1 to $2 last week.

Hogs: Futures seen steady to mixed attempting to shake off Monday’s weakness. Futures traders’ optimism over export potential cooled a bit yesterday but should improve today. We will get the USDA’s latest export forecasts for the year later this morning. National average hog bids inched up 9 cents Monday with bids in Iowa/Minnesota rising 34 cents. Pork cut out values rose 21 cents on strength in ribs, hams, picnics and loins.  April lean hog futures settled down 1.175 cents at $65.075 on Monday, just above key support at $64.875. Hog futures have completely priced out any upside risk to better Chinese purchases this year.    

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