Ahead of the Open: Grains Defensive Amid Rain Forecast in Brazil, Caution Before Trade Talks

Posted on 01/29/2019 6:32 AM

Grain Calls

Corn:  Steady to Mixed
Soybeans: Down 3 to 5 cents
Wheat: Steady to down 2 cents

General Comment:   The U.S./Chinese tensions rose ahead of trade talks Wednesday.  The Trump administration on Monday announced criminal charges against China's Huawei, escalating a fight with the world's biggest telecommunications equipment maker and coming days before trade talks between Washington and Beijing.  U.S. Commerce Secretary Wilbur Ross said the Huawei charges are "wholly separate" from the trade negotiations. U.S. Treasury Secretary Steven Mnuchin said the United States expects to make significant progress this week in the trade talks with Chinese Vice Premier Liu He, who will later meet with President Donald Trump. Trade sources say to watch whether a negotiating document comes out of high-level talks beginning Wednesday. On Monday, markets got a reminder of the potentially damaging economic impact of the Sino-U.S. trade war as Wall Street stocks were hit by profit warnings by several firms. The USDA plans to release several key grain reports on Feb. 8 including quarterly U.S. grain stocks, winter wheat seedings and a final report on 2018 crop production, the department's chief economist told Reuters via email on MondayWeather pattern change appears likely in South America. Brazil will be mostly dry and warm the next five days with showers developing. Rain increase across most areas next week easing dryness. Argentina will be wet into the weekend before drier trend develops next week.

South America crop consultant Dr. Michael Cordonnier cut his soybean crop forecast 1 million metric tons (MMT) to 114 MMT this week and maintains a lower bias going forward. Brazil corn crop forecast was adjusted down 0.5 MMT to 91.5 MMT.  Cordonnier also cut the Argentina soybean crop outlook 1 MMT to 55 MMT while leaving his corn projection unchanged at 40.5 MMT.

Corn is seen opening on either side of unchanged waiting for upcoming USDA data. Smaller crops in Brazil may lend light support.

Soybeans seen falling for a second straight session on concerns over escalating U.S.-China trade tensions and forecasts for some rain in Brazil weighing on the market. Soy crushing group Abiove lowered its estimate of Brazil's soybean crop to 117.9 million metric tons (MMT), from 120.9 MMT in December. Agronomists taking part in Agroconsult’s crop tour of the main grain-producing regions in Brazil expect their forecasts for soybean output this season to decline further as a result of poor weather in states such as Mato Grosso do Sul and Paraná. Some fields in those dry areas were reporting yields at less than half of what was seen in the previous season. Brazil produced a record crop of 119.3 MMT last season.

Wheat futures are seen on the defensive in follow through selling to the disappointing close on Monday. Russia could harvest more than 120 million metric tons (MMT) of grain in 2019, Akrady Zlochevsky, president of the Grain Union, told a press conference. Zlochevsky said the Russian Agriculture Ministry yesterday forecast a grain harvest of 108-110 MMT, less than the 112.9 MMT harvested in 2018.The Grain Union forecasts Russia will export 45-47 MMT of grain in the marketing year that begins July 1, above the AgMin estimate for 42 MMT. Taiwan bought a total of 55,000 MT of U.S. wheat for March and April shipments and including spring, hard red and soft white wheat.

Livestock Calls

Cattle: Steady-mixed

Hogs: Steady-mixed

Cattle: futures seen trading with mixed trends. Wholesale beef prices ended mixed on Monday, giving back some of the morning advances. Sales were moderately active at 121 loads. Choice is near the highest in more than two months. Slaughter was 118,000 on Monday, unchanged from a year earlier.

Hog futures seen mixed. Futures are deeply oversold, and traders are waiting for signs that cash hog market is finding its seasonal low. Still, cash hogs fell on Monday, with the average U.S. cash hog down 32 cents. Wholesale pork carcass prices rose 83 cents to 68.50, extending a 2-day rebound from the lowest in two months last week. Slaughter rose to 470,000 head on Monday, up from 463,000 last year.

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