Ahead of the Open: Wheat Dragging Corn and Soybeans Lower Amid Weak Chart Patterns

Posted on 06/05/2019 6:18 AM

Grain Calls 

Corn: Down 5 to 7 cents
Soybeans: Down 5 to 7 cents
Wheat: Down 8 to 14 cents

General Comment: Wheat is back leading corn and soybeans to the downside as fears about U.S. crop losses have eased and chart selling resumed today after reversal down action on Tuesday.    USDA surprised the markets with an improvement in the U.S. crop ratings as of Sunday when most were looking for another decline from heavy rains across both the HRW and SRW production areas.  
Corn fell to a 1-week low overnight, falling more than a dime after failing to make new highs yesterday on further confirmation of slow U.S. planting progress. The failure to sustain gains Tuesday amid positive news was a warning signal. Markets under pressure from a slightly drier forecast for the western growing areas. Eastern belt will be largely shut down for planting this week. The two-week forecast, if verified, is better than the last two weeks, but certainly not all clear for planting. It will be a struggle for corn planting to top 85% completed by next week. USDA said in a report after the market close on Monday that U.S. corn planting was 67% complete, below market expectations of 71% completion rate and well below the average pace of 96% at this time of year. Soybeans are giving back small gains recorded on Tuesday on chart selling. USDA said U.S. soybean planting was 39% complete on June2, below market expectations of 42% and significantly below the average pace of 79%.

Some of the weakness may be tied to investors looking at equity investments instead of commodities. Global stock indexes rallied on Tuesday and U.S. stocks registered their biggest one-day gains in five months as Federal Reserve Chairman Jerome Powell seemed to open the door to the possibility of a rate cut to offset risks posed by a global trade war and other recent developments.   

The United States' trade disputes with China, Mexico and other countries has been escalating in recent weeks, increasing market uncertainty and potential demand for U.S. farm goods. President Donald Trump warned on Twitter that he’s not “bluffing” in his threat to impose 5% tariffs on goods from Mexico, even as opposition to the move grows among Republican lawmakers. Later today, Mexican Foreign Minister Marcelo Ebrard is meeting officials at the White House to find a way to appease the president. 
Chinese importers are preparing applications for waivers on import tariffs levied on 734 U.S. goods in the Sino-U.S. trade war, after the finance ministry said it would start taking submissions. The Ministry of Finance last week posted a list of goods for which waivers could be granted that includes meats such as beef and pork, soybeans, coal and copper scrap. The ministry did not say when the waivers would be granted, but it did indicate that some waivers could be applied retroactively. The policy is mainly targeting firms that have bought and booked U.S. soybean shipments earlier during the trade truce.

USDA daily export sales reporting service did not report any new large export sales.

Corn: Futures open steady to week after the defensive close on Tuesday on reports of rising U.S. imports. Archer Daniels Midland Co. and other grain traders are selling Brazilian corn to Smithfield Foods Inc. in the U.S., Reuters reports. Although known for some time, headlines have stalled the weather rally. Typically corn imports are small but concerns over U.S. production and record crops in South American may lead to higher than normal purchases. The greatest US corn imports from South America were in the 2012/13 marketing year and totaled 67 million bu. One of the sources cited by Reuters details that Smithfield Foods likely ordered between five and 10 corn shipments from Brazil. Paraguay and Argentina are also shipping corn to the U.S., with around 40 million bu. now under contract for shipment this year.

Soybeans: Futures did rise to new swing highs yesterday and closed slightly higher, but still nearer the lows of the day. The market remains concerned that any losses in U.S. production this year will not significant change the burdensome global supply situation.   

Wheat: futures on down on some drier weather for U.S. wheat development and light rains easing crop stress in parts of Canada, Europe, Russia, Ukraine and Australia…all the major exporters. Worries about global demand for U.S. crops is keeping funds in a selling mode.

Livestock Calls:

Cattle:  Weaker

Hogs: Weaker

Cattle: Futures seen steady to weaker after a light cash market trading at lower money on Tuesday, but futures are suggesting much larger decline to come. Wholesale beef prices were mixed yesterday with Choice down 20 cents and Select up 34. However. Beef sales were active.

Hogs: Futures seen on the defensive today after trying to rally yesterday. The pork cutout value dropped $1.26 on Tuesday, with bellies and butts leading the decline. But the softer prices did encourage strong movement of 431.25 loads. Meanwhile, cash hog prices again edged lower on Tuesday, dropping 13 cents and keeping pressure on summer contracts. China will encourage the restocking of hog herds, and strengthen the production of poultry, beef and mutton, to increase meat supplies, the cabinet said on Wednesday. China's customs agency plans to increase inspections of Canadian meat and meat product imports, a move that could seriously damage the Canadian industry, officials said on Tuesday. A Canadian agriculture ministry notice to the industry said it had been told the Chinese would open all containers of Canadian meat and meat products and in some cases 100% of the contents will be inspected.

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