AgriVisor Morning MarketWatch

Friday, November 09, 2018
***** Corn futures down 3 cents ahead of the break; soybeans off 3 cents; Chicago wheat down 6. ***** 

   # Grains trade with a weaker tone on light to moderate overnight volume. Market participants are still working to sort out a host of surprises provided by Thursday’s crop report. Lower equity futures, softer oil prices, and a firmer dollar help to pressure the grains in the early going. 
   # Recapping report day, USDA lowered corn yield from 180.7 to 178.9 bushels per acre while also dropping soybean yield from 53.1 to 52.1 bpa. The yield reduction helped corn carryout come down slightly to 1.736 billion bushels. Soybean carryout was raised to 955 million bushels as a result of the yield cut being more than offset by a 160 mbu lowering of the export target. The government analysts cited a recent Chinese census report as support for drastic hikes made to world corn carryout. Global corn ending stocks for 2018/19 were expected near 159 million tons but came in at 308 mt. 
   # The shocking revisions made to Chinese corn supply estimates are still being digested, but many analysts are suggesting that the development should have limited impact on prices, since China’s corn is not available to world buyers. There also remain questions about the quality of inventories after several years of stockpiling. One important implication of the new numbers involves recognition that China has made bigger strides on yield productivity than had been thought before. 
   # Defense Secretary James Mattis will lead a delegate of U.S. officials in talks with the Chinese over international security today. North Korea will be a key topic of discussion, as will recent tensions stirred by the Chinese over their actions in the South China Sea. A successful meeting may help generate good will in the lead up to President Trump’s meeting with Chinese President Xi at the end of this month.
   # Former Iowa Governor and current Ambassador to China Terry Branstad met with President Trump, USDA chief Sonny Perdue, and lead trade negotiator Robert Lighthizer to discuss the U.S. approach on Chinese trade negotiations. Branstad is hopeful that the group can “develop a framework that can lead to an agreement.”
   # Soyoil futures are the major drag on soybeans this morning, the product falling alongside its rival palm oil market in Asia. Palm oil prices are tumbling toward three-year lows as inventories remain robust and exports turn sluggish. Traders will be watchful for the potential impact of an expected El Nino, which severely decimated palm production in 2015.
   # Hedge funds left report day still long the corn market by about 50,000 contracts. They enter today’s session with a net-short soybean position estimated near 55,000 contracts and are thought net-short Chicago wheat by 40,000 contracts.  
   # Stocks are turning defensive in response to Thursday’s release of minutes from the November Federal Reserve Open Market Committee meeting, in which central bankers presented an optimistic view about the economy that is expected to keep them locked in on an aggressive interest rate stance. A report on inflation found the Producer Price Index rising by 0.6 percent last month to beat a consensus estimate of +0.3 percent and give interest rate hawks more ammunition.    

***** Livestock futures look to start mixed as bull spreading continues to be a main market feature. ***** 

   # Cattle futures are being bull spread to put pressure on the deferred contracts in reflection of estimates for beef production to rise into the end of the calendar year. USDA has beef output rising 1.2 percent from quarters three to four. Beef export sales leaned a little weak on Thursday and couple with a seasonal lull in domestic consumption to paint a bearish picture of demand.    
   # Bearish speculators are rolling short hog positions into the February futures contract, sending it down for a test of a key low at $58.77. A sharp move lower for cash and wholesale markets leaves futures defensive at the week’s end.