Traders Await Next Catalyst

Published on: 03:47AM Sep 18, 2019

Good Morning from Allendale, Inc. with the early morning commentary for September 18, 2019.

Grain markets were mostly quiet in mixed overnight trade as traders await the next catalyst to move them one way or the other. With trade talks between the US and China set to resume this week, traders are monitoring headlines closely as they await US harvest to enter full swing.

Talks of imports of Brazilian corn into the US swirled the market yesterday. Rich Nelson points out, however, that these cargoes were booked back when prices were high, and that last year’s total import was 109,452 metric tonnes (4.3 million bushels), while the almost completed old crop has Sep – Jul imports of 106,309 tonnes (4.2 million bushels).

China's plan to implement a nationwide mandate for ethanol-blended gasoline in 2020 is in serious doubt amid a significant decline in the country's corn stocks and a shortfall in ethanol production capacity, government experts said on Tuesday. State stockpiles of corn, the main raw material for ethanol production, have fallen to around 56 million tonnes currently from more than 200 million tonnes in temporary reserves in 2017 (Reuters)

Agroconsult estimates Brazil's 2020/21 ethanol production at 32 billion liters in the central-south region, up slightly from the 31 billion 2019/20 estimate.

The U.S. Trade Representative's office announced that trade talks with China will resume in Washington tomorrow. Traders believe we should continue to see Chinese soybean purchases ahead of the meeting. Higher-level talks are still expected next month.

President Trump said, "I think there’ll be a deal maybe soon, maybe before the election, or one day after the election. And if it’s after the election, it’ll be a deal like you’ve never seen, it’ll be the greatest deal ever and China knows that."

The Fed will be out with their interest rate decision this afternoon at 1:00 PM CDT. Many are expecting rates to be cut by .25. Housing starts and Building Permits will be released this morning at 7:30 AM. 

South Korea is culling thousands of pigs after confirming African swine fever at a farm near its border with North Korea. The US has a solid pork export relationship with South Korea. Last year we shipped them 727 million lbs. of US pork. They accounted for 12% of all our exports.

Cattle on Feed will be out this Friday at 2:00 PM CDT. The average guess for On Feed at of September 1st is 99.3% of last year. Placements are expected at 93.7%, and Marketings at 98.3%.

Cold Storage is expected to show a 624 million lb. total pork stock level for the end of August. The five-year average is 593 million lbs. Our estimate represents an increase of 22 million lb. from the previous month. The five-year average month to month change for August is an 18 million lb. increase. Beef stocks, at 471 million lbs., are over the five-year average of 454. This month’s estimate represents an increase of 16 million lbs. from the previous month. The five-year average for this month is a 12 million lb. increase. The report will be released next Monday at 2:00 PM CDT.

Dressed beef values were lower with choice down 0.85 and select down 2.66. The CME feeder index is 137.12.  Pork cut-out values were down 0.45.