Trade Headlines Dominate
Jul 27, 2018
Good Morning! From Allendale, Inc. with the early morning commentary for July 27, 2018.
Grain markets continue to react to the latest headlines out of Washington and from around the world regarding trade deals. This morning's US GDP number is expected to be a big one.
Thanks to everyone who participated in Allendale’s Summer Conference Webinar Series this week! The corn, soybean, wheat, and livestock outlooks have been recorded and are available online.
Trade remains the clear focus of markets as new trade related headlines continue to be seen. Yesterday's headlines included, "Trump relents on EU car tariffs, as US-China fight derails Qualcomm deal", "Mexican president wants NAFTA deal to be reached soon", "USTR'S Lighthizer says his hope is that before very long US will have a NAFTA deal," and many more. We expect the headlines to continue.
The U.S. administration got more out of a trade deal with the European Union than it had expected and the two will work together to deal with China's market abuses, a top White House official told Reuters on Thursday. (Reuters)
China's state planner announced that the country is looking to reduce soymeal levels in animal feed as a way to limit it's dependance of foreign soybeans as a result of the ongoing trade war.
Weekly export sales out yesterday morning had wheat sales of 385,865 metric tonnes (all 2018/19), within the 200,000 – 500,000 trade expectation. Corn sales totaled 1,086,005 metric tonnes (338,514 for 2017/18 and 747,491 for 2018/19), also within expectations. Soybean export sales came to 1,501,947 metric tonnes (538,127 for 2017/18 and 963,820 for 2018/19), over the 400,000 – 900,000 trade guess. The old crop soybean number is a record level for this particular week.
US hard red wheat is estimated at a 41.1 bpa yield this year according to scouts in the Wheat Quality Council's annual tour. This is up from last year's 38.1 bpa. Durum wheat yield was projected at 39.3 bpa, down from 39.7 last year.
CME Group will raise the maintenance margins for Chicago wheat to $1,550 per contracts, up from $1,350 for the nearby contracts. Front month KC wheat is also being increased to $1,625 from $1,350. The rates are effective with today's close.
The White House is close to a waiver that would allow the sale of E-15 on a year-round basis. "I'm very close, I have to tell you, to pulling off something you have been looking forward to for many years and that's the 12-month E15 waiver," Trump said while in Iowa yesterday.
Managed money funds were buyers of 6,000 corn and 4,000 soymeal in yesterday's trade. They were sellers of 5,000 soybeans, 7,500 wheat, and 4,000 soyoil.
The Trump administration is telling Republican lawmakers to expect blockbuster economic figures Friday morning when the Commerce Department releases data on U.S. gross domestic product (GDP) for the second quarter. (The Hill) The report is due to be released at 7:30 AM CDT.
Cash cattle had some trade on Thursday at slightly lower prices than last week. Weakness in futures has been giving the packers the stronger hand for finishing purchase.
August live cattle futures remain at discount and trade doesn’t expect many deliveries on August 6th, first notice day. Live cattle futures have put in a large outside day on the charts (not a friendly signal). Next level of support in the August contract should be 106.20 and in October at 106.75.
Cash hog weakness has been caused by large supplies of market ready hogs. Plant closures for holiday and closures because of storm damage combined with excellent weather for rate-of-gain is giving packers an easy task of finding enough inventory.
Weekly pork sales were reported by USDA at 21,104 metric tonnes which was a good number for this week at 10% over last year. Trade is looking for only 2.3% increase over last year.
Lean hog futures flushed out more long positions on Thursday by notching new contract lows in the August contract. October contract punched through the 20-day moving average on the upside and closed lower. Trend remains down, expect some support at 52.00 in the October and resistance near 56.00.
Dressed beef values were higher with choice up .27 and select .69. The CME Feeder Index is 149.21. Pork cutout value is down 3.02.