AgriVisor Morning MarketWatch

Thursday, July 12, 2018
***** Corn up a couple ahead of the break; soybeans higher by 1 3/4 to 3 cents; Chicago wheat up 2 1/2. *****

   # Report day.  USDA issues Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports at 11:00 am central.  In part due to higher acreage and record quarterly supply estimates found on the June 29 reports, analysts expect to see ending stocks rise on today’s report.  Corn carryout is anticipated at 2.11 billion bushels for 2017/18 and 1.71 bbu for 2018/19 while the average trade guesses for soybean stocks are 507 million bushels for the old-crop and 471 mbu for the new.  
   # One key question for today’s report is whether or not USDA will adjust corn and soybean yield estimates.  It is rare that the government analysts touch yield on the July report, but accelerated crop development this year may encourage an early estimation.  Crop condition ratings that hover near historical highs suggest that yields, if changed, would up from the initial model-driven predictions of 174 bushels per acre for corn, 48.5 bpa for soybeans.  
   # Reductions are expected to be made to world wheat production forecasts.  Dry weather should be reflected by lower output estimates for Russia, Ukraine, and the European Union.  Total world wheat production is expected to drop from 266.16 million tons to 265.05 mt.  Analysts at Strategie Grains just cut their projection for total European grain production by 4.4 percent due to wheat crop losses.
   # Ethanol production was down 3.2 percent from the previous week, but the previous week was very strong and this week’s output was still ahead of last year by 2.6 percent.  Negative, though, was that ethanol stocks grew by 1.9 percent on the week.  
   # New-crop corn and soybean futures are trading near key technical support levels at $3.50 for CZ18 and $8.50 for SX18.  Next up to lend potential support for December corn is $3.38, which marks the opening of a gap left open by the CZ17 contract when it expired.  Recent highs at $3.74 and $3.80 1/2 will serve possible resistance on a rebound.  $8.47 1/4 is the contract low to watch for November soybeans.  Soybean futures are making an important test of lows from $8.40-$8.50 that were put in during 2015 and 2016.  
   # Trade worries have had an outsized impact on soybeans relative to corn, bringing the SX18/CZ18 multiple down to 2.39.  The SX17/CZ17 stood at 2.59 on this day last year.  For now, the price relationship suggests that U.S. farmers will be making a big switch back to planting corn next year.  This year was the first in three decades that growers seeded more acreage to soybeans than corn.  
   # Markets are skittish because of new U.S. tariffs that would affect at least half of all goods imported from China.  After President Trump threatened taxes on an additional $200 billion worth of Chinese goods, there has been some talk of trade negotiations possibly resuming.  The U.S. and China still have almost seven weeks to strike a deal before the next round of tariffs are implemented.    

***** August live cattle futures start with a test of chart support from the 50-day moving average; hogs are trending lower but also ripe for an oversold bounce. *****

   # Cattle futures are trending weaker as hedge funds sell on trade-related demand worries.  Beef demand is currently running very strong for this point in the season, so traders will look to see if cash values can hold steady this week as a result.       
   # Hogs are also moving lower under the pressure of hedge fund selling.  Traders see swelling supplies and have uncertainty over demand prospects due to tariffs being placed on U.S. pork exports.