Ahead of the Open: Corn, Beans Mixed and Quiet Before Key Feb. 8 USDA Reports

Posted on 02/04/2019 7:46 AM

Grain Calls

Corn:  Steady to mixed
Soybeans: Steady to mixed
Wheat: Down 1-2 cents

General Comment: China’s state-run buyers Cofco Corp. and Sinograin purchased more than one million tons of American soybeans each, the companies said in separate statements on Saturday. The soybeans will be shipped in the April-July period and loaded at ports both in the U.S. Gulf and the Pacific Northwest, people familiar with the matter told Bloomberg News. The transaction comes ahead of China’s Lunar New Year holidays, when Cofco and Sinograin are expected to be absent from the market.  China Vice Premier Liu He Thursday after the conclusion of talks in Washington that China would buy an additional 5 million tons. China ag Futures are closed for this week for the New Year holiday. In an interview with CBS' Face the Nation that aired Sunday, Trump insisted that he is making progress in negotiations with China. "It looks like we're doing very well with making a deal with China. I can tell you this, no two leaders of this country and China have ever been closer than I am with President Xi. We have a good chance to make a deal," Trump said.

The daily USDA export sales reporting service said private exporters sold 612,000 metric tons of soybeans to China for delivery in the marketing year that ends Aug. 31.  That confirms some of the sales reported since the U.S./China trade talks ended last Thursday. Traders will want to see more sales confirmations the next several days that add up to at least 2 million metric tons. 

The dollar snapped a two-week losing streak on Monday as strong U.S. jobs data fueled demand while other currencies were trapped in narrow ranges. Weak European data and expanding stimulus in China have increased demand for dollars, despite indications the U.S. Federal Reserve has stopped raising interest rates for now. Oil futures fell from two-month highs this morning adding some pressure to corn and soybean oil. However, the market remains in an uptrend off the December lows after OPEC announced output cuts and the U.S. imposed sanctions on Venezuela last week.  

South America weather is little changed from Friday and slightly negative for prices. Brazil’s weekend rains were scattered but will pick up later this week. Weather forecasts call for moderate rainfall for all areas except the far southern growing areas over the next 5 days. The 6- to 10-day forecast sees close to average rains for most growing areas. Argentina’s weather forecast is generally dry for most growing areas over the next 4 days with light to moderate rains to move in the south by the very end of the week. Next weekend is quiet before more rains return in most areas the first half of next week.

Corn is seen narrowly mixed with traders waiting for the flood of delayed USDA data on Friday when the government updates 2018 production, Dec. 1 inventories and the world supply and demand estimates.  

Soybeans seen steady to mixed to start after failing to hold gains after progress on U.S./China trade talks last week. Like corn, trading will be subdued until the released Friday morning of the latest USDA data on U.S. production and inventories and global supply and demand.  Brazil's 2018/19 soybean crop view was slashed to 112.2 million metric tons by INTL FCStone on Friday, below the USDA December projection of 122 MMT, and the smallest estimate so far by independent forecasters. Last year, Brazil produced a record crop of almost 120 MMT and exported around 80 MMT. FCStone also slashed its soy export view for Brazil to only 68 MMT, down from 72 MMT earlier.

Wheat futures will open lower on export doubts remain even as Russia prices continue to rise with domestic prices above export offers, suggesting a quick slowdown in Russian sales. Traders will be cautious ahead of Friday’s USDA first forecast on winter wheat sowings with most looking for planting acreage to fall near a record low.  

Livestock Calls

Cattle: Steady to weak

Hogs: Steady to lower

Cattle futures seen steady to weaker after bearish technical price action last week. Cash cattle trade turned active in the $123 to $124 range late Friday, roughly steady with the previous week’s trade. Wholesale beef was mixed with Choice falling $1.13 and Select rising 27 cents on slow sales. A lower cash trade seen this week as packers have some inventory.

Hog futures seen on the defensive to start this week after cold weather slowed marketings last week, creating a bit of backlog of marketing-ready animals. Slaughter was estimated at 2.387 million head last week, down from 2.501 million a week earlier and 2.433 million a year ago.  Average U.S. cash hog prices fell 32 cents on Friday to $50.38 while wholesale pork carcass values were cut $1.06 to $66.99. Bellies and ribs continue to drag pork values lower even as loins show some strength. Total sales were light at 278.2 loads. Futures are oversold but rebounds will come when cash markets start to rally.

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