Ahead of the Open: Grains Steady-Firm on Weather But Gains Limited by Slow Exports

Posted on 05/02/2019 8:09 AM

Grain Calls

Corn: Steady to up 2 cents
Soybeans: Down 2-3 cents
Wheat: Steady to up 3 cents

General Comment: Corn and wheat futures seen firmer this morning as too much rain is raising concerns that U.S. production may not reach earlier expectations. Heavy rains forecast out another two weeks have increased talk that farmers will take more prevent-plant crop insurance than normal this year, reducing planted acreage and production potential.  Soybeans remain weak as some acres may move out of grains and into soybeans while export competition continues to intensify from South America. The markets are finding little direction from mixed global stock values this morning, a slightly weaker U.S. dollar and a downturn in crude oil futures.

Today’s weekly export sales report will limit gains, as business fell below market expectations. Wheat export sales fell to 122,100 metric tons (MT), down 72% from the prior four-week average. New-crop wheat sales were 297,400 MT about as expected. Corn sales totaled 586,500 MT, down 25% from last week and 17% below the four-week average. Sorghum sales rebounded 96% from the prior four-week average and included 124,000 MT sold to China. Soybean net sales last week were 313,400 MT, down 61% from the prior four-week average. China was credited for 136,400 MT, but 133,000 was switch from sales made to unknown destinations.  Soymeal sales were 67% below the prior four-week average.

The United States and China are nearing a trade deal that would roll back a portion of the $250 billion in U.S. tariffs on Chinese goods, Politico reported after U.S. Treasury Secretary Steven Mnuchin said the two countries completed "productive" talks in Beijing. The talks are to resume next week in Washington, where some observers say a deal announcement is possible. Politico quoted two people close to the talks as saying the sides have reached an understanding on how to enforce the agreement, but details need to be worked out.
Top trade priorities for the Trump administration include securing trade deals with China and Japan, and ratification of the USMCA, U.S. Chief Agricultural Negotiator Gregg Doud and USDA Undersecretary Trade and Foreign Agricultural Affairs Ted McKinney said Tuesday.

Few areas will go without rain and flooding returns to the Southern Plains, Delta and Southern Midwest mid next week. Assuming the forecast verifies, May 1-15 precip in Illinois will match the average for the entire month.  Prevent plant is being widely discussed by producers amid limited progress that will be scored across the principle Corn Belt in the next two weeks. The pattern for the next 5 days is one of lite/moderate rain with heavier totals during the 6-10-day period. Cumulative 10-day rainfall of 2 to 5 inches will be widespread with some isolated totals of 5 to 9 inches, mostly favoring areas from Texas to Ohio. Cooler-than-normal temps across the northern half of the Plains and Midwest and the lack of sunshine will limit soil moisture evaporation and planting progress

USDA made no new large export sales announcements in its daily reporting service Thursday. 

Corn market is holding gains above the 20-day moving average with the 40-day and 50-day moving average about 4 to 6 cents above current prices. EPA Administrator Andrew Wheeler is considering a plan to offer small refiners partial relief from Renewable Fuel Standard (RFS) requirements, Politico reported. The report said that giving the partial exemptions relative to 2018 RFS compliance "could offer Wheeler a compromise to try to assuage both the biofuel backers and the oil industry, U.S. ethanol production for the week ended April 26 averaged 1.024 million barrels per day, down 2.29% versus a week ago, down 0.78% versus a year ago, the Energy Information Agency said yesterday. Inventories fell 0.2% from a week ago to 22.695 million barrels, but still up 2.5% from a year ago. USDA said 441.7 million bu. of corn used for fuel alcohol production in March, down from 472.9 million bu. a year ago. Since Sept. 1, production is down 4.5% from a year ago.  USDA forecasts the corn for ethanol use for 2018-19 down 1.9%. It would take an increase of 1.7% year-to-year between April and August to reach the current estimate. USDA may cut its corn use for ethanol in next week’s monthly update. 

Soybean seen slightly lower after failing to hold stronger values overnight. The U.S. soybean crush in March was pegged at 179.4 million bu., down from 182 million a year ago and slightly below the 179.9 million expected by traders polled by Reuters. Soybean oil inventories at the end of March rose to 2.233 billion lbs., up from 2.149 billion a month earlier and down from 2.444 billion lbs. a year ago.

Wheat futures are extending the bounce off new contract lows for a second session but rallies may be limited amid weak exports and generally good crop conditions in the Southern Plains. However, that is offset by too much rain across the SRW production belt. Crop scouts on the second day of an annual three-day tour of Kansas hard red winter wheat fields on Wednesday projected an average yield of 47.6 bushels per acre (BPA) in the southwestern portion of the state. The figure is above the tour's prior five-year average for the same area of 39.3 BPA and above last year’s 35.2 BPA. Oklahoma's 2019 wheat estimated at 119.3 million bu., up from 70 million bu. produced last year, Mark Hodges, executive director of Plains Grains told scouts on the Wheat Quality Council's annual Kansas crop tour on Wednesday.

Livestock Calls:

Cattle: Weak

Hogs: Steady

Cattle futures seen weaker. Beef prices fell Wednesday with Choice down $1.62 and Select slipping 71 cents. Sales improved at the lower prices. However, export sales in the week ended April 25 total 10,500 MT of beef, down 50% from the prior four-week average. Shipments were 18% below the four-week average. Cash cattle trade picked up at softer prices of $122 in Kansas and between $123 and $125 in the western Corn Belt. However, live cattle futures are at least $8 below those price levels. That signals recent technical-based selling is overdone, especially with grilling season just getting started. 

Hog futures expected steady as today’s weekly export sales were a disappointment after yesterday’s surge. USDA reports 16,100 MT of pork sold last week, while up 4% from a week earlier is was down 59% from the prior four-week average. There were no new Chinese purchases last week. China did ship 4,400 MT, pushing total shipments 2% above the four-week average. The national average hog prices rose a penny while the pork cutout fell 23 cents, led lower by further weakness in bellies. China has suspended pork imports from two Canadian companies, Canada’s ag minister told Reuters in an interview yesterday. That could boost U.S. business to China if a trade deal is completed soon. Recognizing the growing threat ASF presents, U.S. Grains Council (USGC) has increased their biosecurity safeguard protocols. No USGC-led or -organized teams will visit swine farms or operations in the U.S. in 2019, and teams from confirmed ASFV-affected countries will not visit any type of U.S. livestock operation.

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