Ahead of the Open: Soybeans, Corn Retreat on Profit Taking, Wheat Follows

Posted on Thu, 11/19/2020 - 05:07

GRAIN CALLS

Corn: Down 3 to 5 cents
Soybeans:  Down 7 to 10 cents
Wheat: Down 1 to 4 cents

GENERAL COMMENTS Grain markets retreated overnight after soybeans failed to hold the majority of gains yesterday and soymeal futures ended lower after failing to make new contract highs. Soybeans have been leading higher and better rain chances for parts of Argentina and Brazil are triggering profit taking by fund managers today. The markets also lack the tailwind of the financial markets today with U.S. stock extending Wednesday’s biggest retreat in a month this morning and the dollar is strengthening.  Gold is falling back toward underlying support and oil prices are slightly weaker.

Global investors seem to be more concerned about lockdown measures to stop the spread of the virus than they are hopeful about prospects for a vaccine. Increasing volatility may also limit buying enthusiasm as Covid-19 infections surge. Adding to caution was a top USDA official telling a video concerns Wednesday that U.S. farmers could plant a record acreage of major field crops next year if favorable prices continue and spring weather allows for timely planting.

The corn and soybean complexes have lent support to wheat in recent days and the downward momentum this morning is carrying over to wheat. Domestic prices in Russia eased yesterday from recent record highs as the ruble rose to an eight-week high against the dollar, easing concerns over domestic price inflation.

In Argentina, a band of shower and thunderstorm activity is still likely to advance from southwest into northern areas next Monday through Wednesday. Some of this rain will be meaningful, including in recently drier-biased areas of the east. This rain will be beneficial and important; though, follow up moisture will still be needed for better support of crop development. In Brazil, an important rain event is likely in the far south next Wednesday through Friday. This will provide some needed relief from recent dryness; though, confidence is a little low of how significant this rain will be since it is a week away. Some improvement of soil moisture is expected. However, Parana and southwestern Sao Paulo through southwestern Mato Grosso will be notably dry through Nov. 26 leading to some increase in crop stress.

Before the reopening, USDA failed to announce any new daily export sales today. That may add to concerns about high prices slowing demand.   

USDA’s weekly export sales report for the week ended Nov. 12 showed better sales for corn, soybeans and soyoil but wheat sales fell. USDA reported corn sales rose 11% from the prior week to 1.089 MMT, topping pre-report estimates for 600,000 MT to 1.0 MMT. China bought 174,700 MT last week. Soybean export sales fell 6% from a week earlier to 1.388 MMT but that was above the top end of trade estimates for 600,000 to 1.2 MMT. China bought 1.061 MMT last week and may lend support. Net sales of wheat were 62% below the prior four-week average at 192,400 MT, but China was the top buyer of 125,000 MT. Chinese purchase will curb the impact from sales falling to a marketing-year low last week.

Corn:  December corn futures hit new contract highs yesterday and close near session highs. Overnight trade was confined inside of Wednesday range, just a normal correction from overbought levels. Last week’s ethanol production unexpectedly fell 1.5% from a week earlier and has averaged about 9% below recent average since Sept. 1. Ethanol demand the past four weeks is running 11% below prior years so far in November. That compares with a 9% departure in the previous two months. U.S. gasoline demand typically tends to fall into the winter months, but consumption is bolstered late in the year by holiday travel. That is particularly at risk this year as the rise in U.S. coronavirus cases has led to a tightening in restrictions.

Soybeans: Soybeans are pulling back from the highest since June 2016 this morning with meal retreating after failing to reach new high yesterday. The Argentine government stepped in to end a strike by tugboat crews that had been underway less than a day but did threaten to disrupt grain exports at the country’s largest Rosario port. The government ordered wage talks to resume. There has been a lot of unrest and strikes/strike threats this season as workers struggle with sky-high inflation. Malaysian palm futures reversed early gains on Thursday, retreating from a more than eight-year peak earlier in the session as traders expect a new survey on Friday to show a 17% drop in exports in the first 20 days of November.  The high crude palm oil prices probably led to demand rationing in developing countries. Meanwhile, Dalian's most-active soyoil contract 2%, while its palm oil contract jumped 2.7%. Soyoil prices at the Chicago Board of Trade fell 0.7% overnight.

 Wheat:  A rain event will occur Saturday into Sunday which will lead to some meaningful moisture in the Texas and Oklahoma Panhandles and in southwestern Kansas. This will be beneficial and will lead to some soil moisture improvement; however, follow up rainfall will be needed for more favorable winter wheat establishment in unirrigated fields.

LIVESTOCK 
Cattle: Steady to firm
Hogs: Weak

Cattle:  Exporters sold 46,400 MT of beef last week, a new marketing-year high. South Korea, Mexico and Japan were the top buyers and today’s report will provide early support to the cattle futures. Traders are watching end of the week packer buying. A total of 543 cattle sold at yesterday’s online Fed Cattle Exchange at a weighted average price of $110.25. While that’s up slightly from last week’s average steer price of $109.62, it’s a bit of a retreat from more active trade the week prior at the online exchange at $111.00 for one to nine-day delivery and $110.69 for 1 to 17-day delivery. Meanwhile cash prices softened $2 from trade earlier this week in Iowa, while Kansas, Nebraska and Texas saw trade pick up at $110, in line with last week and trade earlier in the week. Beef cutouts were mixed yesterday with Choice continuing to extend strong gains this week, rising $2.12 to $235.84. Sales were moderately active.

Hogs:  Today’s weekly export sales report will weigh on futures. Exporters reported net sales of 28,900 MT of pork were sold last week, down 18% from the prior four-week average. China was a net buyer of 2,100 MT, including decreases of 1,400 MT. Net sales for 2021 were only 2,300 MT. Shipments remains active, up 4% from the prior four-week average. Hog weights in the Iowa/southern Minnesota market climbed 1.4 lbs. the week ending Nov. 14 to 289.1 lbs., which is also 1.4 lbs. above year-ago levels. Cash hog bids slipped 20 cents amid rising weights and slaughter. The mid-week hog slaughter total was counted at 1.464 million head, 24,000 head more than last week, but 20,000 head short of a year ago.  Meanwhile, the pork cutout value slipped another 92 cents on Wednesday, but sales were active for a second straight day.