Grain and livestock futures are mostly lower early Wednesday.
Grains Fade Government Reopening
Grains futures are fading the growing possibility of the government reopening. DuWayne Bosse with Bolt Marketing says while the news gave the grains and outside markets a push higher on Monday that buying is fading in a “buy the rumor sell the fact” type reaction.
Grains See Pre-Report Positioning
Grain markets are also positioning ahead of USDA’s crop production and WASDE reports due for release on Friday. Bosse says average trade guesses range from 183 to 184 on corn so down three to nearly four bushels, while soybeans yield cuts are modest at around .5 bushels per acre.
The other key will be what USDA does with demand as corn export inspections are running 66% ahead of normal so far this marketing year, but the agency left plenty of wiggle room in their demand projections in the September report. Still ending stocks are projected at 2.1 to 2.2 billion bushels and unless they drop below 2.0 billion it may not have a bullish impact on corn prices.
Bosse says the other question is what USDA uses for export demand for soybeans especially regarding China. While a deal has been struck for 12 MMT there have been very few sales on the books so he says it will be interesting to see what USDA uses in the report. Average trade guesses on ending stocks are still fairly close to 300 million bushels so it may not be market mover.
Where’s China?
The other significant market factor is the lack of China purchases. Reuters reports China only needs a few million tons of soybeans for December and January. While other news reports indicate soybean stocks in Chinese ports are at a record 10.3 MMT, up 3.6 MMT from last year and crushers are indicating inventory of 7.5 MMT, the most since 2017. Meanwhile, COFCO signed agreements this week to buy 20 MMT of Brazil soybeans and products.
Bosse says this all indicates that China does need many U.S. soybeans to get through until Brazil’s next crop comes to market and there are growing questions about why the U.S. hasn’t signed the deal yet. Plus is there a “market consideration” clause in the agreement similar to the Phase One deal that would let China only have to buy U.S. soybeans if they are price competitive, which right now is not the case. Bosse says Brazil soybean prices are well under U.S. prices.
Watch Global Wheat Stocks in the Report
The wheat market has had a good rally off of five year lows but has also stalled out waiting fresh news from the USDA reports. Bosse says domestic ending stocks are expected to be up around 25 million bushels, so a non-event. He will be more closely watching the global production and stocks estimates which are expected to grow.
Is the Cattle Market Really Bottoming?
After limit up closes in live and feeder cattle futures on Monday there has been a general lack of follow through buying in the market. Bosse says Monday’s buying was tied to the risk on appetite in the overall markets tied to the government reopening. However, he’s not sure the funds are done liquidating as there is still fear of President Trump’s plan to lower beef prices, which have the market reacting to every social media post.
Lean Hogs Carving Out a Low?
Lean hog futures have also been up the last two days and chart action has been more positive. So, Bosse is more confident this market is trying to carve out a low, especially as demand will pick up going into the holiday.
