June 19, 2019

Trade Relations with US Worry Futures Traders

Good Morning! From Allendale, Inc. with the early morning commentary for June 14, 2018.

Grain markets are continuing under pressure as trade is concerned about when and on what tariffs will be placed come Friday or early next week. Money flow and technical selling is overshadowing any buying interest.

U.S. President Donald Trump will meet with his top trade advisers today to decide whether to activate threatened tariffs on billions of dollars in Chinese goods, said a senior Trump administration official. (Reuters)

Federal Reserve used the strong U.S. economy as a reason to raise its benchmark interest rate for the second time this year and signaled that it may step up its pace of rate increases. The Fed now foresees four rate hikes this year, which is up from the three it had previously forecast.

Weekly export sales report will be released this morning at 7:30 am CDT. Trade estimates are for old crop corn 600,000 to 900,000 mt. new crop 200,000 to 400,000 mt. old crop soybeans 100,000 to 400,000 mt. new crop 100,000 to 400,000 mt. old crop soymeal 50,000 to 250,000 mt. new crop 0 to 150,000 mt. old crop soyoil 5,000 to 20,000 mt. new crop 0 to 6,000 mt. Wheat sales are estimated at 150,000 to 450,000 mt.

Funds were estimated as net sellers of 10,000 corn, 18,000 soybeans, 7,000 wheat, 5,000 soymeal and 1,500 soyoil contracts on Wednesday.

Informa released their estimates for 2018 US corn planted acreage at 88.7 million acres compared to USDA’s March 31 estimates of 88.0 million acres. They think soybean planted acreage could be 89.9 million acres versus USDA’s 89.0 million acres.

Ethanol production last week was 1.053 million barrels per day compared to 1.041 the previous week. For the week, production was up 5.1% versus last year and over the 3.5% increase that occurred over the previous seven weeks.  Trade is starting to talk about the idea USDA will have to raise corn for ethanol even farther.

FranceAgriMer kept its monthly estimate of French 2017/18 soft wheat exports outside the European Union unchanged at 8.4 million tonnes, confirming that France is set to sell less wheat outside the bloc than to other EU countries. (Reuters)

EIA data showed crude oil stocks declining by 4.143 million barrels versus trade expectations of a decline of 1.246. Data also show declines in gasoline and distillates.

Fed Cattle Exchange auction on Wednesday were all no sales. Cash trade in the country is quiet as some early bids by packers started at 112 to 113. Offers are mostly at 118. Packer margins are still in the black, however, most of July 4th bookings are done. The retail meat demand slows from mid-July in to early August during the so-called dog days of summer.

Cattle numbers are expected to be larger in coming weeks but weights of market ready cattle will help offset some of the supply problem.

August live cattle futures although a large discount to cash has key support at this weeks low of 103.25. A close below that level could send us back to the 100.00 level for support. A close above 106.67 is needed to breakout to the upside.

Cash hog prices continue to strengthen as demand for pork is strong. Hog weights have fallen below a year ago for the first time in 2018. Trade will be watching the weekly export data this morning. The USDA raised its beef and pork export projections for 2018 in Tuesday’s monthly report despite trade tensions that have dampened sales potential to important customers like China and Mexico.

July lean hog futures are showing overbought on the charts, however, Wednesday was the first day breakout to the upside of a consolidation area. Next resistance crosses at 84.67 support at 81.00.

Dressed beef values were lower with choice down 1.02 and select down 1.09. The CME Feeder Index is 141.02. Pork cutout value is up .39.

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