After the Bell: Soy Firms on U.S./China Trade Talk Progress, Dry Brazil Weather

Posted on 01/07/2019 2:25 PM

Corn:  Corn finished slightly lower after rising to a two-week high. March corn settled down ¾ cent at $3.82 ¼, with new-crop December slipping ¼ cent to close at $4.03 ¾. The market rose up to short-term overhead resistance as increasing dryness in Brazil threatens yields for the full-season crops and raises risks for the second-crop corn planted after soybeans. Prices took on a more defensive tone after weekly export shipments slowed. Today’s weekly USDA grain inspections report showed corn shipments fell to 501,541 MT, down from 952,881 MT a week earlier and 850,768 MT a year earlier.  Prices are also finding buying interest subdued because USDA will not release its key, price-sensitive annual Crop Production and Quarterly Grains Stocks reports as originally scheduled on Jan. 11. USDA will announce the new release dates as soon as government funding is restored. That report is expected to show smaller U.S. production and ending stocks, further tightening global supplies.

Soybeans:  Soybean futures closed up 2 to 2 1/2 cents in the nearby contracts today, hitting three-week highs, but closing near mid-range. Soybean meal futures ended up just shy of $3.00 in the nearby contracts today, while hitting 2.5-month highs. Bean oil closed down 15 points in the nearbys. The first day of U.S./China trade talks in Beijing reportedly went well. Reports said China’s vice-premiere showed up at the meeting, which is an indication of China’s intent to get a trade deal. The U.S. can reach a good settlement over immediate trade issues with China, while an agreement on structural trade issues and enforcement will be harder, U.S. Secretary of State Wilbur Ross said on CNBC Monday morning. U.S. soybeans inspected for export last week fell to 673,172 MT in the week ended Jan. 3, down from 756,153 a week earlier. However, there was 74,166 MT shipped to China last week, the first in several months. At the end of December, Brazil export shipments since last February already exceeded the USDA forecast by for the entire year that ends Jan. 31 by 4.7%, suggesting USDA will have to raise its estimate and cut inventory projections and Brazil’s crush forecast. That means less meal for export, helping Chicago soybean meal today. Dry pockets remain across parts of Brazil after weekend showers provide limited relief and forecasts remains dry and hot for at least the next 10 days with signs this drier pattern is getting entrenched over central Brazil.  

Wheat:  Wheat futures settled mostly 1 to 3 cents lower today. Winter wheat contracts finished near mid-range, while spring wheat ended in the lower portion of today’s range. Wheat futures were unable to sustain corrective gains from the last three days last week. The lack of confirmation of rumored Chinese purchases of U.S. wheat that supported the market late last week caused futures to pull back. Traders will have to go without confirmed export sales news until USDA’s offices reopen. Weekly wheat export inspections were disappointing at just 260,134 MT. That was well short of expectations and not nearly enough to inspire fresh buying. The U.S. dollar index fell to its lowest level since Oct. 22 today. That would typically encourage some buying in wheat on hopes of improved export demand. But given the inconsistent demand for U.S. wheat, traders are hesitant to buy based on weakness in the dollar.

Cotton:  Futures prices ended up 16 to 39 points in the old-crop contracts and near their daily lows. The rebound in the U.S. stock market the past two sessions, the recent rally in the crude oil market to near $50.00 a barrel, and a weakening U.S. dollar index that fell to a two-month low today, have all worked in favor of the cotton market bulls to enable prices to rebound from last week’s 13-month low. President Donald Trump said Sunday trade talks with China are going very well and that weakness in the Chinese economy gave Beijing a reason to work toward a deal. U.S. officials’ first day of meetings with their counterparts in Beijing got off to a positive start with Chinese Vice Premier Liu He unexpectedly attending what was meant to be a discussion between lower-ranking officials. While no breakthrough is expected at talks this week, they will lay the ground for possible senior-level discussions later this month.

Hogs:  Lean hog futures finished 5 to 45 cents lower through the August contract. Some far- deferred contracts posted slight gains. Hog futures faced followthrough selling from last Friday’s disappointing close, though seller interest was limited by strength in the cattle market and generally supportive outside markets. Very little direction came from the cash hog market today, as USDA did not report a morning price due to “confidentiality,” meaning trade was extremely light. Traders are anxious to see if recent strength in the cash market continues. If recent cash gains are halted, it would suggest packers were short-bought coming out of the holidays and the temporary situation has been resolved. If the cash strength continues, it would increase odds the cash market has posted a low and a seasonal increase is likely.

Cattle:  Cattle futures rose today, halting a four-day decline. February cattle closed $1.275 higher at $123.375, with April up $1.075 to $125.075. Feeder cattle rose 92.5 cents to $1.10.  Both markets closed in the upper 25% of today’s daily ranges. Traders went from worrying about weaker cash cattle bids this week to expecting steady to higher cash markets, leading to a strong turnaround in futures. The reported boxed beef trade for last week was 362 loads, 31.6% higher than the 275 loads a week earlier.  Improved sales offset concerns that lower beef prices were required to boost demand. Midday beef prices were mixed with Choice falling 50 cents and Select gaining 58 cents. Midday sales volumes were moderately active.  Choice should lead rallies, given its narrow premium to Select. There is a strong seasonal tendency for cash cattle prices to continue to strengthen into February and March because of seasonally smaller supply and lighter carcass weights.

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