Ahead of the Open: Wheat Falls to 11-Month Low to Spurt Exports; Corn Follows

Posted on 03/07/2019 7:57 AM

Grain Calls

Corn: Down 1 to 2 cents

Soybeans: Up 1 to 2 cents

Wheat: Down 2 to 5 cents

General Comment: Evidence is growing that the trade war between the U.S. and China is doing real harm to the global economy after the OECD cut its growth forecasts for both 2019 and 2020. Grain markets bears are betting that some of the damage could be permanent -- effectively meaning any rebound from a deal would not lead to a full recovery 9in global growth or Chinese demand for U.S. farm goods. U.S. President Donald Trump said on Wednesday that trade talks with China were moving along well and predicted either a “good deal” or no deal between the world's two largest economies. Trump's comments after the Commerce Department said on Wednesday that the U.S. goods trade deficit surged to a record high in 2018 and so did the Chinese deficit.
Meanwhile, USDA undersecretary Ted McKinney said the trade talks are primarily taking place via video teleconference and going well. “Right now, I think there's just a lot of work in getting words down ... a contract or agreement, and that’s the current status,” he said. In addition to demand for China to make substantial changes substantial changes to its laws and practices to protect U.S. intellectual property, Washington has sought increased Chinese purchases of U.S. goods, including farm and energy commodities and manufactured products, to reduce a U.S. trade deficit with China that it estimates at more than $417 billion for 2018.

Soybeans firmed overnight on rumors that China buyers are shopping for U.S. beans to begin the purchasing process of 10 million metric tons (MMT) of pledged for U.S. soybean two weeks ago. Chinese authorities are planning to buy as much as 200,000 MT of pork for government reserves to bolster the confidence of pig farmers shaken by the African swine fever (ASF) epidemic. Reports note the purchases of pork for government reserves will begin March 8.  

The USDA's daily export sales reporting service showed no new large sales in the past 24 hours. The lack of new sales will weigh on soybeans and corn today.

Corn market are called slightly lower on followthrough selling to yesterday’s weak finish. U.S. ethanol production for the week ended March 1 averaged 1.024 mil barrels per day, down 0.4% versus a week ago and down 3.1% from a year ago). Ethanol inventories rose 2.3% from a week earlier and rose 4.8 above a year ago. Brazilian ethanol trade rose to the highest ever in February and is creating competition for U.S. exports.  Sales of corn in the week ended Feb. 28 were 969,700 MT for 2018-19 delivery and 280,900 for next season, USDA said this morning. Both were in-line with pre-report trade estimates. Mexico was the best buyer last week.

Soybean futures seen starting with a firm tone on short covering and some new buying interest after prices held support on Wednesday’s drop. However, gains will be limited by poor export sales last week. USDA said 311,400 MT sold for delivery before Sept. 1. Sales for 2019-20 were 72,000 tons. Both totals were well below trade estimates. Soybean meal export sales in week ended March 1 were 230,500 MT, at the top end of trade forecasts.   

Wheat futures seen weak after falling to new contract lows overnight. Prices continue to push lower to find fresh export demand as overseas buyers continue to wait for lower prices. This morning, USDA said sales rebounded to 621,700 MT, topping trade forecasts for 200,000 to 500,000 MT of sales. New-crop sales were 205,000 MT, doubling trade ideas.   

Livestock Calls:

Cattle: Mixed

Hogs: Steady to firm

Cattle futures seen mixed waiting for cash trade to develop and probably must wait until after the latest January Cattle on Feed Report on Friday.  Feedlots are holding out for higher money this week as beef prices this week are the highest since last June with slaughter slowing and cattle weights falling. Sales improved a bit Wednesday after sluggish activity to start the week.  Both cattle and hogs will be closely watching the inventories of beef and pork in tonight’s monthly Cold Storage Report as of Feb. 1. Export sales in the week ended Feb. 28 rose to 24,700 MT with South Korea buying nearly half the total

Hog futures are steady to firm on slightly strong cash bids on Wednesday. The national average prices rose 33 cents and in Iowa/Minnesota prices rose 13 cents. after failing to hold early gains on Tuesday. Fresh pork prices extended the two-week rally to 6.9% to the highest since Feb. 13.  Bellies are up 20% from the Feb. 19 low, touching the highest since Feb. 6. Slaughter remains elevated this week, up 5% the first three days of this week. China on Thursday confirmed a new outbreak of African swine fever in the Guangxi Autonomous Region, in the country's south, as the highly contagious disease spreads through the world's largest hog herd. This morning’s weekly export sales report showed 24,400 MT sold last week, but no new Chinese business was reported.

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