AgriVisor Morning MarketWatch

Wednesday, April 17, 2019
***** Corn and soybean futures fractionally firmer; Chicago wheat up a nickel. ***** 

   # Grains trade with small gains overnight to follow up a rough Tuesday session. Volumes are minimal as fresh news is scarce. Traders are assessing the planting forecast and waiting for word on U.S./China trade talks. 
   # Traders are keeping a close eye on the South American currencies as they weaken to reflect economic worries in Brazil and Argentina. New Brazilian president Jair Bolsonaro enters office with the major headache of having to negotiate pension reform while Argentine leaders are also dealing with a big budget crisis at a time when the peso is floundering. It has been suggested that the two governments may turn to taxing grain exports to help with fiscal shortfalls. 
   # A strong recent string of Chinese economic data relieves the country of some pressure put on it by the ongoing U.S./China trade fight. China’s first quarter GDP reading reached above expectations to 6.4 percent. Government subsidies have allowed exports to remain strong, even as many Chinese goods still face a 25 percent U.S. tariff charge. 
   # While news involving China trade negotiations has been mostly positive as of late, market participants are turning wary of not hearing anything concrete about next steps. Telephone conferencing between the two sides is said to be occurring this week, but it is uncertain if additional face-to-face meetings will be deemed necessary. The previously-teased summit between Presidents Trump and Xi also remains unscheduled yet. 
   # The inaugural round of trade negotiations with Japan wrapped up Tuesday. Agriculture will be a major point of policy reform as U.S. Trade Representative Robert Lighthizer works to secure a similar deal that Japan has in place with Trans-Pacific Partnership members. Japan is a top-five importer of U.S. ag goods. The U.S. is Japan’s biggest supplier of red meats and maintains large market share in the trade of processed vegetables and dairy. 
   # U.S. steel and aluminum tariffs are still a major roadblock for ratification of the U.S.-Mexico-Canada trade agreement. The U.S. is taxing incoming products at 25 percent under authority of Section 232 national security protections. The trade deal is also threatened by House Speaker Nancy Pelosi’s current refusal to bring the bill to vote by Congress. Observers suggest that failure to ratify USMCA would lead President Trump to pull the U.S. out of NAFTA.  
   # Weekly ethanol production stats will be issued today. Weather disruptions and still-weak processing margins have kept ethanol production sluggish recently. USDA cut its ethanol grind target on the April WASDE report to 5.5 billion bushels, which would be up marginally from 2017 but down 1.9 percent from the 2018 usage total.
   # Another storm system rolls through the upper Plains this morning while a smaller patch of rain tries to cross the Mississippi River into Illinois. Skies should clear throughout most of the central Midwest today before wet weather redevelops in the evening. Meteorologists have backed off on expectations for Thursday’s rains.  
   # Improved weather in Russia boosts prospects for that country’s wheat crop and helps to pressure U.S. prices this week. Conditions for the U.S. winter crop are viewed strong and add bearish sentiment. The idea is that U.S. exports will continue to struggle as the world’s big wheat buyers wait patiently for the next harvest. 

***** Cattle futures waiting for guidance from the cash market; hogs still finding support from ASF concerns. ***** 

   # Cattle futures are trading with the influence of April delivery positioning. That expiring contract currently holds a small premium to last week’s cash trade and about a $5 premium to next-up June futures. Friday’s Cattle on Feed report will lend further fundamental guidance. Placements surprised on the high side last report, so analysts are coming into this one with the expectation of cattle placed on feed growing by about 4 percent from last year.              
   # Hog futures are facing small pushback from technical sellers after rallying back to contract highs achieved earlier in the month. Expectations of increasing pork export demand help support, but traders are waiting to see the next round of sales data, which will be released Thursday morning.