Ahead of the Open: Soybeans Supported by More Chinese Demand

Posted on Tue, 09/15/2020 - 08:09

GRAIN CALLS

Corn: Steady to 2 cents lower
Soybeans: 2 to 4 cents higher
Wheat: Mixed

GENERAL COMMENTS: USDA’s weekly crop condition ratings showed a one-point drop for corn and a two-point decline for soybeans rated “good” to “excellent” as of Sept. 13. On our weighted Crop Condition Index (CCI; 0 to 500-point scale, with 500 representing perfect), the corn crop slipped another 1.7 points to 354.1 points. The soybean crop dropped another 1.6 points to 355.9 points. The corn CCI rating is 14.5 points below its five-year average for this week. The soybean CCI is now 1.5 points below the five-year average – the first time that has been the case since the first condition ratings of the growing season. The soybean market found support from the drop in ratings overnight, but corn failed to find much buyer interest.

The other supportive factor for soybeans is strong export demand, driven by Chinese buying. Traders expect more Chinese demand near-term, though most importers have needs booked through year-end and are now lining up shipments for first-quarter 2021 delivery. As a result, traders will pay close attention to planting conditions in Brazil. The planting window for Brazilian soybeans opens this week. The earlier Brazilian farmers get crops in the ground, the sooner new-crop supplies will be available to export. Since domestic old-crop soybeans in Brazil are tight and will get tighter until harvest, crushers will be competing with exporters for the initial new-crop supplies.

USDA reported daily export sales of 132,000 MT of soybeans to China, 132,000 MT of soybeans to unknown destinations and 120,000 MT of corn to unknown destinations – all for 2020-21 delivery. This followed soybean sales to China and “unknown” and corn sales to China and Japan on Monday.

Corn: After pushing to the highest level since mid-March on Monday, December corn futures pulled back a little overnight. Funds are net long the corn market and they may want to pause before further adding to that position. Key near-term support for December corn futures is the July double-top at $3.63 and the 10-day moving average near $3.62.

 

Soybeans: November soybean futures scored a new contract high on Monday and traded above $10.00 but backed well off session highs into yesterday’s close. Futures were firmer overnight, but failed to take out Monday’s high of $10.08 3/4, which is initial resistance today. Clearing that level would have bulls targeting the $10.25 level on the continuation chart. The 5-day moving average at $9.90 3/4 is initial support.   

 

Wheat: Winter wheat futures were firmer Monday while spring wheat prices dropped on spreading. Traders unwound those spreads overnight. Spread trading is likely to continue during daytime trade, especially if corn and soybeans move in opposite directions, as they did overnight.  

 

LIVESTOCK
 

Cattle: Higher
Hogs: Lower

 

Cattle: Live cattle and feeder cattle futures closed strong on Monday and flashed technical signs that a short-term low is in place, which sets up followthrough buying this morning. But it wouldn’t surprise us to see a corrective pullback. Futures are trading premium to the cash market and Choice beef prices continue to fall, with wholesale Choice beef down another $2.68 yesterday. Plus, there’s risk the hog market could lend spillover pressure. If cattle futures are able to continue higher, it would be stronger evidence of a low being in place and could get packers to raise cash bids.

Hogs: Lean hog futures are expected to face followthrough selling after a poor close Monday that included a bearish reversal in the December contract. A gap lower this morning would leave a two-day island top on the daily December lean hog chart and make a stronger case for a short-term top. Potentially countering the bearish chart action is strength in the cash market. The average national direct cash hog price surged $4.94 on Monday, though the pork cutout value dropped $1.80. By the end of today’s trade the market should have a better idea of whether a top is in place or if bulls want to defend the price rally by stepping in under the market.