AgriVisor Afternoon MarketWatch

Tuesday, June 12, 2018
***** Corn up 9 1/2 to 10 1/2 cents; soybeans fractionally firmer; Chicago wheat higher by 17 3/4 to 20. *****

   # Report day was a friendly one for the grains as a particular result of the USDA making surprise cuts to U.S. ending stocks.  An addition of 75 million bushels for old-crop demand and 50 million bushels for the new-crop brought new-crop carryout down to 1.577 billion bushels versus the average trade guess at 1.663 bbu.  A better bean crush target brought new-crop soybean carryout down to 505 mbu against trade estimates near 525 mbu.  
   # Brazil’s corn crop estimate was revised lower to 85 million tons, which was a bigger cut than the trade had anticipated.  But, Brazilian soybean production was increased by more than expected to 119 mt.  The USDA is now ahead of Brazil’s Conab agency, which this morning estimate the crop at 118 mt.  
   # The move up for corn futures was a strong one, but it only served to take back losses from Monday.  Next up for resistance on the nearby July is the contract’s 200-day moving average at $3.82.  Retracement targets sit at $3.84, $3.89 1/2, and $3.95.
   # Mexico reached into the U.S. market this week for a purchase of 152,000 tons of corn.  Mexico remains top buyer of U.S. corn even while the fate of NAFTA hangs in the balance.  Lately, it has been disagreements with Canada that have set back progress on President Trump’s retooling of the trade agreement.  
   # The consumer price index grew by 0.2 percent in May, as expected.  Inflation growth is being viewed as a positive for the economy and will be one key component of the Fed’s future decisions on interest rates.  The central bankers are expected to wrap up their meeting tomorrow with a directive to raise the Fed Funds rate by another 0.25 percent.  
   # Egypt’s state buying authority tendered for wheat this week and selected Russia and Romania to supply the top-importer with 420,000 tons.  The large purchase may signal some bullishness on the part of Egyptian buyers.  
   # Outside markets were surprisingly quiet on the day despite traders having a number of key economic and political inputs to price in.  Most investors seemed pleased of the outcome of President Trump’s North Korea summit.  Recent employment reports have been positive and today’s inflation reading came in as expected (+0.2% on the month), leaving the Fed on its expected path toward an interest rate hike tomorrow.   

***** Live cattle futures fractionally firmer at the close as feeders incur losses of $0.42 to $0.65; hogs rally $0.77 to $2.05. *****

   # Cattle futures were back and forth on the day before eventually following hogs higher.  Monday’s break lower for the board restored an unseasonably-wide discount to the cash trade.  With boxed beef proving resilient so far this week, traders will wait for further guidance from the cash market.  
   # Hogs took off higher behind an advancing pork products market.  Nearby demand is running strong, but bull spreading in the futures market shows that traders are expecting price weakness into the fall months.  In today’s USDA report, the government analysts reminded the trade that pork production is expected to rise by about 2.5 percent from quarter 2 to quarter 3 and rise by another 2 percent from quarter 3 to 4.