Ahead of the Open: Corn, Soybeans Extend Rallies Ahead of This Morning's USDA Crop Production Report

Posted on Fri, 09/11/2020 - 06:44

GRAIN CALLS

Corn: Up 1 to 2 cents
Soybeans: Up 4 to 7
Wheat: Up 1 to 3 cents

GENERAL COMMENTS:  Soybean futures rebounded from the first drop in 13 sessions yesterday, with November futures climbing to their highest level since June 2018 overnight before paring gains into the break. Corn futures opened under pressure but quickly turned higher and touching new swing highs. Winter wheat futures are mostly higher but also down from overnight highs.  

USDA will update its Supply & Demand and Crop Production Reports at 11:00 a.m. CT today. For the first time this growing season, the report will include the department’s objective field data, as well as farmer surveys and satellite imagery. The report will also account for acres lost to the Aug. 10 derecho storm in Iowa, where the department resurveyed corn and soybean producers. Analysts expect smaller production estimates for corn, soybeans and cotton, which, in turn, is expected to translate to lower new-crop carryover projections for all three commodities. Wheat carryover is expected to be little changed versus August at 924 million bushels.  Historically, analysts tend to underestimate USDA’s production estimates for corn and soybeans in the September report.\


Today’s weekly USDA exports sales report for the week ended Sept. 3 showed better soybean sales with new grain business in line with trade estimates. Net soybeans sales jumped to 3.162 MMT last week, that was above trade estimates for 1.3 to 2.0 MMT. China was the top buyer with purchases of almost 1.6 MMT and slightly above the daily sales announcements. Meal sales were also strong last week but soyoil sales were slow. Export sales of corn totaled 1.823 MMT, with China buying 1.195 MMT with much of that already reported. Sales were just below the top end of trade estimates. Wheat sales fell 14% below the prior four-week average at 484,400 MT last week with no new sales reported to China.

USDA daily export sales reporting program announced private exporters sold 262,000 metric tons (MT) of soybeans for delivery to China during the 2020-21 marketing year with another 222,000 MT sold to unknown destinations. Those sales follow 1.1 MMT of soybeans announced sold to China the first three days of this week.   Daily and weekly export sales should provide a firm tone to soybeans ahead of the USDA data later this morning.

President Donald Trump said there would be no extension to the Sept. 15 deadline for ByteDance Ltd. to sell the U.S. operations of its TikTok video sharing app. Authorities in China said last month that any deal for the company would have to be approved by regulators in Beijing, a move which practically guaranteed a sale could not be made on time. ByteDance, the world's most valuable startup, seems set to concentrate its future expansion plans in Asia. For Trump, it seems there is little to be gained from changing his mind on the deadline as he again makes "tough on China" a central part of his election campaign.

Tensions with China likely to persist under either election outcome. Advisers to Democratic presidential candidate Joe Biden say they share the Trump administration’s assessment that China is a disruptive competitor. This suggests that even with an administration change in January, friction between China and the U.S. would remain high, according to a Wall Street Journal article

Global equities are having a relatively quiet Friday so far at the end of a week which has seen major indexes whipsawed as investors appear to become more nervous about valuations. Overnight, the MSCI Asia Pacific Index added 0.5% while Japan's Topix index closed 0.7% higher. In Europe, the Stoxx 600 Index was slightly higher with comments on euro strength and possible extra monetary stimulus from European Central Bank chief economist Philip Lane doing little to boost sentiment. S&P 500 futures point to a higher open. It is important for stock indices to avoid posting low-range weekly closes or risks may increase for bigger breaks this month.

Corn: Futures moved to the highest since late March overnight. How the market performs after the USDA updates on crop size and demand updates will be critical to market direction. Prices failed to extend losses into new lows after the “bearish” August USDA reports and began their month-long rally.

Soybeans:  With soybeans and soybean meal challenging winter highs, both are in position to pause or peak. The marketplace is implying that this morning’s USDA report is a key to direction and how the markets respond to the data into next week is key.  Brazilian producers have already sold 48% of their projected 2020-21 soybean crop, locking in strong prices, according to AgRural. Farmers have also sold 2.2% of their 2021-22 crop that won’t go into the ground for another full year. The consultancy now forecasts the 2020-21 soybean crop at 131.3 MMT, a 2 MMT increase from its August outlook on a 3.3% expansion in planted acres. Planting of the crop will begin this month.

Wheat: Winter wheat futures action Friday will tip whether prices are forming larger bull-market tops or smaller bear-market pauses. Private analyst SovEcon increased their 2020 Russian wheat production estimate from 82.6 to 83.3 MMT on better yields in Siberia. The focus is shifting to new-crop planting. Dry weather has delayed planting in Ukraine. There is still time to get the crop planted within the optimal window, but little rain is expected over the next two weeks. Dryness is also a concern in some major producing/exporting regions of Russia, including Krasnodar, Rostov and Stavropol. But again, there is still time to get the crop planted. Russia’s ag ministry reports 35% of the country’s intended acres have been seeded.

LIVESTOCK 
Cattle: Mixed
Hogs: Mixed

Cattle: Cattle futures followed sharply higher hogs but pared gains by the close on weaker cash prices this week. But negotiated sales were relatively light and packers may need to bid higher next week. Gains will remain limited by rising market weights that push overall production higher. Support also stemmed from a dramatic uptick in movement on softer boxed beef prices in recent days. Nearly 200 loads changed hands yesterday, another sign that consumer demand continues to be better than expected. Today’s weekly export sales tally for the week ended Sept. 3 showed beef sales of 15,500 MT, up 37% from a week earlier and 14% above the four-week average. South Korea was the best buyer, but China also purchased 1,200 MT last week.

Hogs: Futures soared sharply higher yesterday after the east German state of Brandenburg confirmed case of African swine fever in a wild boar on Thursday, and South Korea immediately banned pork imports from Germany with other nations including China and Japan are expected to follow. German officials lobbying China to consider only a limited regional ban considering the AFS was found in a single wild boar. Daily trading limits expand to $4.50 today after limit-higher closes on Thursday and some profit taking may emerge before the weekend. U.S. pork sales last week last week fell 3% below the prior four-week average and down 44% from the 10-month high set last week. Mexico was the top buyer but closely followed by China. Total pork shipments rose 3% above the four-week average. The national average cash hog prices jumped another $2.46 Thursday on active packer demand. The CME cash hog index was $1.39 higher at $61.92 yesterday and the 2-day average should gain another 52 cents today. This puts the cash index up a strong $4.32/cwt for the week. Pork cutout rose another 73 cents to near a three-month high hit earlier this week and sales were moderately active.