Ahead of the Open: Corn, Soy Mixed After Unimpressive Overnight Rally on Crop Ratings

Posted on 07/02/2019 7:54 AM

GRAIN CALLS:

Corn: Mixed
Soybeans: Mixed
Wheat: Down 2 to 5 cents

General Comment: Corn may rise for the first time in four sessions, rebounding from a three-week low on sliding U.S. crop ratings. Soybeans are also seen starting mixed but may rally later today. The markets lack a fresh bullish fundamental story after USDA’s Acreage Report was a negative surprise for corn on Friday and the announcement that the agency will have to resurvey 14 states for planting changes for the August Crop Production report.

Prices action was unimpressive with the changes in crop conditions this week when most looked for improvement. When USDA's weekly crop condition are plugged into the weighted Pro Farmer Crop Condition Index the corn crop slipped 1.3 points to 349.3, about 33 points below the five-year average. Corn was rated 56% in “good” to “excellent” condition, compared with 76% a year ago. The soybean crop dipped 0.8 point to 341.0 on the CCI, down 25 points from the five-year average. USDA said 54% of the crop rated “good” to “excellent” condition, down from 71% on average

The U.S. Midwest weather forecast has no major changes and lean price negative. Very warm and hot weather breaks this weekend across the central U.S., followed by brief warming, then a strong cool-off for three to five days starting July 10.  Storms accompany fluctuating temperatures, resulting in widespread coverage of at least near-normal rainfall, and a moderate probability for above-normal totals.

President Donald Trump said on Monday that trade talks with China were under way and any deal would need to be somewhat tilted in favor of the United States. The never-ending dispute between the U.S. and Europe over support to subsidy-reliant aircraft manufacturers Boeing Co. and Airbus SE took another turn when Washington added $4 billion of EU goods that could be targeted as part of the battled. The Europeans have their own list of retaliatory measures ready should the situation get more serious.  One positive bit of news on the tariff front is that Trump said measures against Mexico are off the table after the country’s response to immigration flows.

The U.S. dollar is weaker resting on its 200-day moving average, global stocks are slightly lower, and gold is higher as optimism over progress in the China trade war subsided and a fresh U.S. threat of tariffs on Europe kept investors on edge. This morning the yield on Italian two-year debt turned negative for the first time in over a year.  The German bund yield continues to hit new lows, with the 10-year yield closing in on the ECB’s deposit rate of a NEGATIVE 0.4% as policy makers at that central bank hint at even more easing. Australia’s central bank cut interest rates by a quarter points to a record low of 1% today. U.S. Treasury yields are also holding near recent lows as Federal Reserve policy makers see the need for interest rate cuts. Yesterday we got manufacturing numbers from all over the world, and the general gist is that they were bad, although the U.S. at least notched a reading in expansive territory but still the lowest since September 2016.   

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

Corn:  Futures are will struggle from fund liquidation of longs. On Monday founds sold about 20,000 futures pushing their net long down close to 105,000 to 110,000 futures and options, compared with nearly 188,000 contracts on June 25.


Soybeans: Futures are slightly firmer on better demand. But funds seem eager to sell rallies on ideas warmer weather will aid early development. Funds were estimated net-sellers of about 10,000 contracts Monday and probably hold a net-short position of about 50,000 futures and options, up from about 34,000 contracts on June 25.  USDA reports May soybean crush at 165.3 million bushels, down 6.3 million bushels from April and down 7.2 million bushels from May 2018. Despite the reduction, May crush came in above trade estimates near 164.3 million bushels. Lower-than-expected soyoil stockpiles in yesterday’s report points to stronger demand in the month as daily consumption rose 6.8 million lbs. from April to 69.5 million lbs. per day.  

Wheat: The advancing harvest will weigh on futures and cash bids this week. U.S. Winter Wheat harvested was 30% completed on June 30, up from 15% a week earlier but behind the five-year average of 48%.  The U.S. winter wheat crop was rated 63% “good” to “excellent” condition, above trade estimates for unchanged conditions at 61%. Egypt announced a tendered to buy an unspecified amount of wheat from global suppliers and U.S. wheat is unlikely to be included. Algeria’s state grain agency issued an international tender to buy milling wheat for August shipment. Japan tendered to buy a total of 123,968 MT of food-quality wheat from the U.S., Canada and Australia in a regular tender.

LIVESTOCK CALLS:

Cattle: Steady to firm
Hogs: Steady to firm

Cattle: Live cattle may build on Monday’s strength amid steady cash bids and the discount futures are trading to current cash bids. Wholesale beef was fractionally higher for both Choice and Select with moderately active trade on Monday. Slaughter was 120,000 head on Monday, down 1,000 head from a week ago and up 4,000 from a year ago.

Hogs: Futures seen trying to followthrough on technical buying. National average cash hog prices fell 1 cent on Monday, but the pork cutout fell 56 cents with a sharp drop in bellies offsetting all the gains in other cuts. Movement continue just moderate. Slaughter Monday rose 13,000 head to 461,000 head from a week earlier.  

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