After the Bell: Grains Defensive to End January on China Trade Deal Caution

Posted on 01/31/2019 2:39 PM

Corn: Futures prices closed down 4 1/4 to 5 1/4 cents and near their daily lows. Trading continues choppy and sideways on the charts. USDA released the delayed and much-anticipated export sales data for the week ended Dec. 20 today. Corn sales from back in December were 1.699 million metric tons (MMT), compared with 1.974 MMT a week earlier and 1.0 to 1.5 MMT forecast by traders. Very cold weather in the central U.S. recently will increase demand for corn in feed rations during the month ahead. Firming interior basis bids suggest tightening available supplies and a smaller 2018 crop. USDA updates its crop supply and demand table on Feb. 8. Market participants started today nervous but optimistic ahead final day of U.S./China trade talks. President Donald Trump tweeted this morning that China trade meetings are going well and "no deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points."    Optimism on trade turn more cautious and prices fell after a midday news conference when Trump said he would either strike a very big trade deal with China or "postpone" it, but it was not clear precisely what he was referring to.

Soybeans:  Soybean futures closed lower after rising to the highest in three weeks and then ended at the lowest price in four days. March soybeans fell 5 3/4 cents to close at $9.15 1/4. Still, the contract was up 20 3/4 in January. March soybean meal fell $1.10 to settle at $310.00 and March soyoil fell 25 points to close at 30.17 cents. President Trump told reporters at midday “this is either going to be a very big deal, or it's going to be a deal that we'll just postpone for a little while.”  His comments set in motion a new round of selling on concerns that a U.S./China deal is unlikely to get completed this week and the two sides may not reach any conclusion before the March 1 deadline for new U.S. tariffs on China goods. Trump will hold talks with Chinese negotiators late Thursday at the White House.  Prices opened higher this morning on good export news and following earlier Trump tweets that trade talks with Chinese officials this week are “going well with good intent.” South America weather is leaning more price-negative with rains next week in Brazil expected to aid crops and drier weather likely to firm soils across Argentina.  

Wheat: SRW wheat futures finished fractionally to a penny lower, HRW contracts ended 3-plus cents lower and HRS futures settled fractionally to 1 1/2 cents lower in most contracts. Futures ended mid- to low-range. Wheat futures were influenced by selling in the corn market and strength in the U.S. dollar index. Traders are also signaling they are tired of waiting on export demand for U.S. wheat to become price-positive.  Wheat export sales of 526,300 MT for the week ended Dec. 20 failed to spark buyer interest. The data is old, as USDA has begun releasing sales figures that were halted by the government shutdown. What’s needed for a strong price response is confirmation of rumored Chinese business as it tries to reach a trade deal with the U.S. and/or a strong pickup in demand from global buyers that have been buying Russian wheat.  Concerns with winterkill are limited, despite record-breaking cold temps across U.S. winter wheat areas. Some estimates are as much as 20% of the crop is at risk of some damage, but it would be until spring before that is confirmed. Plus, favorable spring weather would help any of the crop singed by the cold temps recover.  

Cotton: Cotton futures prices closed up 4 points to down 12 points in the nearby contracts today, after hitting five-week highs early on. U.S. cotton sales for 2018/19 jumped to 373,100 running (500 pound) bales during the week ended December 20, which represented a marketing-year high. The shipments figure at 207,100 bales seemed supportive as well, although the 2019/20 sales figure at just 4,000 bales was disappointing. Futures initially reacted well to the news, but later turned mixed. Given the laggardly nature of that data, as well as recent rumors of weekly sales totals around 200,000 bales, the lack of sustained strength wasn't surprising. President Donald Trump tweeted this morning that China trade meetings are going well and "no deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the long standing and more difficult points.

Hogs: Hog futures closed lower and near session and monthly lows. April hogs fell $2 to close at $60.225 today and plunged $6.85 in January.  Hog futures extended this month’s decline and closed near session lows amid stepped-up fund selling. A strong $1.54 rebound in midday fresh pork prices failed to slow the session-long slump. Sales were moderately active Thursday after generally lackluster business the first three days of this week. Traders also failed to respond to comments by President Trump that trade talks with Chinese officials this week are “going well with good intent.” Trump reiterated that "tariffs on China increase to 25% on March 1st, so all working hard to complete by that date!” He announced that he will be meeting with Beijing’s top leaders and representatives later today in the Oval Office.  Slaughter levels during the past five weeks have been larger than suggested by the December USDA Hogs & Pigs Report. This week’s slaughter is down 252,000 head from a year ago because the cold weather has shuttered some plants and caused reduced kills at others. That backlog of market-ready hogs will keep pressure on cash prices into next week.  

Cattle: Live and feeder cattle futures closed solidly lower and near their daily lows today. April live cattle scored a contract high and then reversed course to close down $1.70. Other nearby live cattle contract months were down $1.075 to $1.675.  Feeder cattle futures closed down $1.825 in the March and off and $1.80 in the April contract. Notions the recent wintry weather that has backed up cattle marketings recently will create a back-log of cattle coming to market in February helped to push the futures markets down today. Also, wholesale beef prices dropped today, with Choice down a sharp $2.04 and Select off 49 cents. Choice beef rose to a two-month high Tuesday. Movement of boxes today totaled 88 loads. Cash cattle prices may firm this week on cold and snowy weather, but today’s futures weakness plays into the hands of the packers. Still, the showlists look a little smaller and that may help boost packer bids.

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