Barchart Commodity Futures Morning Update

Grain prices this morning are mixed with Dec corn -0.75 (-0.22%), Nov soybeans -3.25 (-0.39%), and Dec wheat +3.25 (+0.64%). Grain prices on Monday closed lower with Dec corn at a new contract low: Dec corn -3.75 (-1.07%), Nov soybeans -7.00 (-0.84%), Dec wheat -5.25 (-1.03%). Bearish factors included (1) ideal growing weather in the Midwest that bolsters the outlook for bumper U.S. grain crops this year, (2) the ongoing China/U.S. trade dispute that may prompt China from purchasing U.S. soybeans, and (3) increased Russian wheat exports that reduce demand for U.S. wheat as Russian wheat exports from Jul 1-Sep 13 were 10.2 MMT, up +48% y/y. SovEcon reported that Russia Aug wheat exports rose +15% y/y to a record 4.5 MMT. Nov soybeans posted a contract low last Wednesday after the USDA raised its U.S. 2018/19 soybean production estimate to a record 4.693 bln bu as they hiked their yield estimate to a record 52.8 bu per acre. The USDA also raised its U.S. 2018/19 soybean ending stocks estimate to a record 845 mln bu and raised its global 2018/19 soybean ending stocks estimate to a record 108.26 MMT. Dec wheat fell to a 2-month low last Thursday after the USDA in last Wednesday's WASDE report unexpectedly raised its global 2018/19 wheat ending stocks estimate to 261.3 MMT, higher than expectations of a cut to 257.4 MMT.

Monday's USDA Crop Progress report showed that 68% of the U.S. corn crop was in good-to-excellent condition as of Sep 16, unch w/w but +7 points ahead of last year. The Crop Progress report also showed 67% of the U.S. soybean crop was in good-to-excellent condition as of Sep 16, down -1 point w/w but +8 points ahead of last year at the same time. Meanwhile, 97% of the U.S spring wheat was harvested as of Sep 16, +5 points ahead of the 5-year average.



Livestock prices on Monday settled mixed: Oct cattle -0.375 (-0.33%), Oct hogs +0.225 (+0.40%). Oct cattle on Monday closed lower after beef packer profit margins dropped to a 1-month low, which may curb packer demand for cattle. Oct cattle Friday rallied to a 4-1/2 month nearest-futures high as strength in cash cattle prices spurred fund short-covering in cattle futures after cash cattle prices jumped to a 3-week high Friday. Supplies remain robust after the most recent (Aug 24) Cattle on Feed report showed cattle on feed as of Aug 1 rose to a record high and the USDA reported U.S. commercial beef production in July rose +5.9% y/y to 2.23 bln pounds. Future beef output may also increase as USDA slaughter data shows 22.989 mln head of cattle processed this year through Sep 15 up +2.7% y/y and the USDA projects U.S. 2018/19 beef production will climb +2.3% y/y to a record 27.783 bln lbs. Foreign demand for U.S. beef was robust through Jun with U.S. Jan-Jul beef exports up +15% y/y at 1.808 bln lbs and with the USDA projecting that U.S. 2018/19 beef exports will climb +2.6% y/y to a record 3.245 bln lbs.

The Aug 22 USDA Cold Storage report was negative as it showed U.S. beef supplies in cold storage in July rose +8.1% m/m and +12.3% y/y to 485.007 mln lbs, a July record since data began in 1915. The recent USDA Cattle on Feed report was negative as it showed cattle on feed as of Aug 1 rose +4.6% y/y to a record for an Aug of 11.093 million head (data from 1996), above expectations of +4.4 y/y. Cattle placements in feedlots during Jul rose +7.9% y/y to 1.742 million head, above expectations of a +5.9% y/y. Cattle marketed for slaughter in Jul rose +5.0% y/y to 1.873 mln head, right on expectations.

Oct hog prices on Monday closed higher on signs of stronger domestic pork demand after wholesale pork prices rose to a 1-1/2 month high. Also, cash hog prices climbed to a 5-week high. Weakness in the cash market had been a drag on futures prices as cash hog prices trended lower over the past 2-3/4 months down to a record low of 36.57 cwt on Aug 31. Another bullish factor for hog prices is concern Hurricane Florence may disrupt pork production in North Carolina, the second-largest pork-producing state. Oct hog prices have been under pressure and slumped to 1-3/4 year nearest-futures low Aug 30 due to retaliatory tariffs from China, Canada and Mexico, which account for 60% of all U.S. pork exports. Abundant supplies amid tepid demand has weighed on hog prices as well as the USDA reported U.S. Jul pork production jumped +6.5% y/y to 1.99 bln pounds, while domestic pork demand has plummeted as wholesale pork prices dropped to a 3-1/3 year low Aug 24. The Jun 28 USDA Q2 Hogs & Pigs report showed robust supplies as the U.S. pig herd as of Jun 1 rose +3.4% y/y to 73.451 mln, a record high for a June 1st (data from 1964). USDA slaughter data shows 85.838 mln hogs processed this year through Sep 15, up +2.6% y/y, and the USDA projects U.S. 2018/19 pork production will climb +4.4% y/y to a record 27.889 bln lbs. The Aug 22 USDA Cold Storage report was positive as it showed overall pork supplies in July fell -2.5% m/m and rose -1.2% y/y to 548.053 mln lbs. Also, future pork supplies may be larger after USDA slaughter data showed the average hog carcass weight on Friday rose to 207.82 lbs, a 1-week high. Foreign demand for U.S. pork was solid through July with U.S. Jan-Jul pork exports up +6.5% y/y at 3.459 bln lbs and the USDA projects that U.S. 2018/19 pork exports will climb +2.1% y/y to a record 6.115 bln lbs.

The USDA Q2 Hogs & Pigs report (released Jun 28) was bearish as it showed that the U.S. pig herd as of Jun 1 rose +3.4% y/y to 73.451 mln, above expectations of +2.9% which was a record high for a June 1st (data from 1964). Also, sows retained for breeding as of Jun 1 rose +3.5% y/y to 6.32 mln, more than expectations of +1.6%, and hogs marketed for slaughter rose +3.4 y/y to 67.131 million, more than expectations of +3.0% y/y and a record high for a June 1st (data from 1964). In addition, piglets per litter in Q2 rose +0.8% y/y to 10.63, slightly below expectations of +1.3% y/y.



Softs this morning are mixed: Oct sugar +0.12 (+1.13%), Dec coffee +0.30 (+0.31%), Dec cocoa +3 (+0.13%), and Dec cotton -0.76 (-0.93%). Softs on Monday settled mixed: Oct sugar -0.53 (-4.75%), Dec coffee -2.40 (-2.41%), Dec cocoa +17 (+0.77%), Dec cotton -0.52 (-0.64%). Oct sugar on Monday fell to a 1-week low on concern India may increase subsidies to its sugar farmers, which may boost India's sugar exports and add to global supplies. Oct sugar last Thursday climbed to a 2-1/2 month high after signs of weaker Brazil sugar production spurred fund short covering. Data from Unica showed Brazil's Center-South 2018/19 sugar output through Aug was down -19.3% y/y at 18.842 MMT, with the amount of sugar converted to ethanol at 20.495 mln liters, up +33.5% y/y. Also, Brazil Aug raw-sugar exports dropped -33% y/y to 1.44 MMT, the lowest for an Aug in 10-years. Oct sugar on Aug 22 slumped to a 10-year nearest-futures low as sugar prices have been hammered over the past 2 months on signs of abundant global sugar supplies. ISO forecasts global 2018/19 sugar production will rise +0.6% y/y to a record 185.2 MMT and projects a global 2018/19 sugar surplus of 6.75 MMT, down from surplus of +8.6 MMT in 2017/18. The USDA's Foreign Agricultural Service (FAS) projects a record 2017/18 global sugar surplus of 10.73 MMT and record global 2017/18 sugar production of 184.95 MMT. The Indian Sugar Mills Association (SMA) projects 2018/19 sugar production in India, the world's second-largest sugar producer, will climb 10% to a record 35.5 MMT and the SMA also asked the government to increase India's 2018/19 sugar export quotas to a record 6 MMT. The Thailand Office of Cane and Sugar Board reported Thailand 2017/18 sugar production rose to a record 14.47 MMT. Conab forecasts Brazil 2018/19 sugar production will fall -9.6% y/y to 34.25 MMT, a 3-year low.

Dec coffee on Monday sold-off to a new contract low and nearest-futures (U18) slumped to a 12-year low on signs of robust supplies. Coffee prices have been hammered over the past 3-months on robust supplies as ICE-monitored coffee inventories continue to climb and posted a 3-1/3 year high of 2.308 mln bags on Friday. Also, weakness in the Brazilian real, which is just above the 2-3/4 year low against the dollar from Aug 30, is pressuring coffee prices as the weak real boosts the export incentive for Brazil's coffee producers. Cooxupe recently raised its Brazil 2018/10 arabica coffee crop estimate to 42 mln to 44 mln bags from a Feb estimate of 40 mln to 42 mln bags. Also, ICO data shows global coffee exports from Oct-Jun were 90.9 mln bags, up +0.3% y/y. The USDA on Jun 15 projected global 2018/19 coffee production will climb +7.1% y/y to a record 171.166 mln bags and global 2018/19 coffee ending stocks will increase by +11.6% to a 3-year high of 32.812 mln bags. Also, coffee production from Columbia, the second-largest arabica-bean producer, rose +3.6% y/y in Jun to 1.087 mln bags. In addition, Vietnam coffee exports this year from Jan-Aug are up +16.5% y/y at 1.33 MMT. Conab projects Brazil 2018 coffee production of 58 mln bags, up +29% y/y, as crops are in the higher-yielding half of their biennial cycle. On the positive side, the USDA projects that global 2018/19 coffee consumption will climb +2.9% to a record 163.219 mln bags. Also, U.S. Jul green coffee inventories fell -7.8% y/y to 6.836 mln bags. In addition, ICO raised its global 2017/18 coffee deficit estimate to -3.5 mln bags from a previous estimate of -2.7 mln bags.

Dec cocoa prices on Monday closed higher on signs of tighter supplies as Ivory Coast farmers delivered 1.880 MMT of cocoa beans to Ivory Coast ports during Oct 1-Sep 16, down -5.01 y/y. Purchases of cocoa from the Cocoa Bard of Ghana, the world's second-biggest cocoa producer, fell by -4.8% y/y to 874,347 MT during Oct 13-Aug 30. Dec cocoa on Friday fell to a 3-week low as forecasts for ideal growing weather over the next week in West Africa spurred fund selling of cocoa futures. Nearest-futures (U18) cocoa on Aug 6 posted a 6-3/4 month low on signs of ample supplies amid mixed demand. Q2 North American cocoa processing data released Jul 20 showed an unexpected decline of -3.1% y/y to 119,301 MT, weaker than expectations for a +0.3% y/y gain. Demand concerns remain after Barry Callebaut, the world’s biggest cocoa processor, warned that high cocoa prices will curb global cocoa demand in Q3. Q2 Asia cocoa grindings rose +15.2% y/y to 185,394 MT, and European Q2 cocoa processing rose +7.3% to 356,109 MT, a Q2 record high in data going back to 2001. Current supplies have tightened as Nearest-futures (U18) cocoa prices rallied to a 1-3/4 year high in May on signs of stronger global demand along with concern excessive dry conditions in West Africa would reduce Ivory Coast and Ghana cocoa yields. ICCO projects that 2017/18 global cocoa production will fall -2.0% y/y to 4.645 MMT and that the global cocoa surplus will fall to +31,000 MT from 2016/17's 6-year high surplus of 296,000 MT.

Dec cotton on Monday closed lower on concern the ongoing China/U.S. trade tensions will keep China from purchasing U.S. cotton. Cotton prices were already on the defensive from last Wednesday’s WASDE report where the USDA unexpectedly raised its U.S. 2018/19 cotton production estimate to 19.68 mln bales, more than expectations of a cut to 19.12 mln bales, and they unexpectedly raised their U.S. 2018/19 cotton ending stocks estimate to an 11-year high of 4.70 mln bales, more than expectations of a cut to 4.58 mln bales. The USDA also unexpectedly raised its global 2018/19 cotton production estimate to 121.97 mln bales, higher than expectations of a cut to 120.51 mln bales and raised its global 2018/19 cotton ending stocks estimate to 77.46 mln bales, more than expectations of 77,23 mln bales. Drought conditions improved in Texas after data from the U.S. Drought Monitor showed that 12% of Texas was in a severe-to-extreme drought as of Sep 11, a 21 point improvement from 33% last week. There is also concern about the Turkish financial crisis, which has dampened expectations for cotton demand from the third biggest buyer of U.S. cotton supplies. Increased cotton output in India, the world's second largest cotton producer, is another bearish factor for cotton prices as India projects its 2017/18 cotton production will climb +9.8% y/y to a 3-year high of 37 mln bales. China Jan-Jul cotton imports were up +12.2% y/y at 820,000 MT, although trade tensions between U.S. and China may limit China's demand for U.S. cotton going forward. The USDA projects that global 2018/19 cotton use will climb to a record high of 127.94 mln bales. Monday’s USDA Crop Progress report showed that 39% of the U.S. cotton crop was in good-to-excellent condition as of Sep 16, up +1 point w/w but well behind the 61% from the same time last year and the worst condition for this time of year since 2011. On the positive side, the International Cotton Advisory Committee predicted global 2018/19 cotton ending stocks may fall -9.8% y/y to 16.91 MMT, a 7-year low.



Oct WTI crude oil prices this morning are up +86 cents (+1.25%) and Oct gasoline is +2.73 (+1.38%). Monday's closes: Oct crude oil -0.08 (-0.12%), Oct gasoline +0.66 (+0.33%). Oct crude oil and gasoline on Monday settled mixed. Crude oil prices were boosted by a weaker dollar and by concern that global oil supplies will shrink due to production losses in Venezuela and looming full U.S. sanctions on Iran in November. Crude oil prices were undercut by news that Russian crude oil production in the first half of Sep rose to 11.33 million bpd from 11.21 million bpd in Aug.



Metals prices this morning are mixed with Dec gold -0.7 (-0.06%), Dec silver +0.032 (+0.22%) and Dec copper +0.046 (+1.72%). Monday's closes: Dec gold +4.7 (+0.39%), Dec silver +0.081 (+0.57%), Dec copper +0.50 (+0.19%). Metals on Monday closed higher on a weaker dollar and on increased safe-haven demand for precious metals with the decline in stocks and the increased trade tensions. Copper was undercut by signs of tighter copper supplies after LME copper inventories fell -3,975 MT to a 7-3/4 month low of 221,925 MT.