After the Bell: Soybeans, Grains Rally on U.S./China Trade Truce Hopes, Dollar Weakness

Posted on 11/28/2018 2:27 PM

Corn:  Corn futures finished up 4 1/2 to 5 1/4 cents today on short covering following recent selling pressure. Prices finished nearer their daily highs. Supportive for corn futures was today’s weekly energy report that showed ethanol production rose 6,000 barrels per day, to 1.05 million, surprising traders that were looking for a slowdown. Ethanol stocks rose 139,000 barrels, to 22.93 million.The corn market also saw buying interest from gains in soybeans and wheat futures prices today. A weaker U.S. dollar on the foreign exchange market also helped out the grain market bulls a bit today.Slow farmer selling of corn has helped to firm Midwest basis bids at ethanol plants and river export terminals.Thursday’s weekly USDA export sales report is expected to show corn sales of 400,000 to 950,000 metric tons in the 2018-19 marketing year.

Soybeans:  Soybean futures rallied a second day, reaching the highest price since Nov. 15, before paring a portion of earlier gains by the close. January futures rose 15 1/4 cents to $8.90 3/4. Soybean meal ended up $2.90 to $3.20, with soybean oil futures up 56 to 59 points. Prices rebounded today on optimism for a cease fire on the U.S./China trade war when Presidents Trump and Xi meet in Argentina this weekend. China will increase access to foreign investors and will boost its protections on intellectual property, Chinese President Jinping Xi said in Spain today. The key now is what the Chinese bring to the dinner table on Saturday to meet White House demands for freer and fair-trade rules. USDA reported this morning that private exporters sold 268,748 MT of soybeans for delivery during 2018-19 to unknown destination. The sales were a positive surprise. Traders look for Thursday’s USDA sales report to show new business in a range from 400,000 MT to 900,000 MT, compared with 680,528 MT a week earlier. Reports that the Trump administration is reviewing the small refinery biofuel blending exemption and talk of potentially renewing the $1 credit for biodiesel blending boosted soybean oil and soybean futures.

Wheat:  SRW wheat futures firmed 5 to 6 3/4 cents, HRW contracts were 5 1/2 to 8 3/4 cents higher and HRS futures ended 1 to 2 1/4 cents higher. Winter wheat markets finished in the upper end of today’s trading range. Corrective buying fueled gains in the wheat market today. A sharp drop in the U.S. dollar index encouraged traders to cover short positions. But a weaker dollar today has limited lasting impact unless there’s a pickup in export activity. While there have been recent indications U.S. wheat is competitively priced, traders will need to see consistent improvement in export demand before there’s any buying with conviction in futures. Tomorrow morning’s weekly export sales data is expected to show wheat sales of 250,000 to 500,000 MT for the week ended Nov. 22.Traders continue to monitor a number of global wheat situations, but none are enough of a concern to fuel active buying in futures or U.S. supplies. Perhaps the one with the most potential firepower for wheat prices is the Russia/Ukraine situation. Wheat futures rallied more than $1 in 2014 when Russia annexed Crimea from Ukraine. A similar price response if Russia launches a strong military move can’t be ruled out. But so far, grain movement out of the Azov Sea is limited – and those ports account for less than 5% of all Ukrainian exports.

Cotton:  Cotton futures closed 83 to 102 points higher through the July contract.The market found support from strong U.S. stock market gains and a weaker dollar after Federal Reserve Chair Jerome Powell said the central bank's policy rate was "just below" neutral, hinting at a potential moderation in the pace of monetary tightening. In his remarks, Powell said that while "there was a great deal to like" about U.S. prospects, "our gradual pace of raising interest rates has been an exercise in balancing risks. Market also gained support from optimism Presidents Trump and Xi will find common ground at a weekend meeting to ease trade tensions. More rains are headed for the cotton belt later this week, increasing risks for crops still standing in fields.  The longer harvest drags on, the greater the odds USDA’s cotton crop estimate will decline further in the Dec. 11 Crop Production Report. USDA reported cotton harvest at only 70% complete as of Nov. 25, seven points behind normal.  

Hogs: December lean hog futures gained 12 1/2 cents today, while the February lost 42 1/2 cents. April hogs were down 30 cents.  Weaker cash hog prices this week and a drop in pork cutout values today pressured the lean hog futures market. Midday pork cutout values lost $1.94 today on lower loins, bellies and hams. Movement was decent at 193.98 loads. According to USDA, average cash hog trade softened 66 cents yesterday, falling below $50. Losses in futures were limited as slaughter this week is running lighter than expected. U.S.-China trade tensions may be easing just slightly ahead of the Saturday meeting between the Presidents Trump and Xi. China will increase access to foreign investors and will boost its protections on intellectual property, Chinese President Xi Jinping said in Spain today.  Trump will arrive at the talks with a fragile coalition of international allies backing his position. Look for trading in the U.S. ag futures markets, including lean hogs, to be more active next Monday morning, following the weekend trade talks between Trump and Xi.

Cattle:  December live cattle futures finished 7 1/2 cents higher, while the February through June contracts dropped 5 to 25 cents. Feeder cattle ended 55 to 72 1/2 cents lower through the May contract. Price action was light and choppy in the cattle market as traders await active cash cattle trade for the week. December live cattle got a little boost from news cattle traded at $116.75 at the online Fed Cattle Exchange. That marked the first sales on that platform in many weeks and suggests strength in the negotiated cash market. While packers paid more for cash cattle than anticipated last week, stressful feedlot conditions in the Plains and strong margins could entice higher cash trade again this week. Deferred live cattle continued the light, sideways trade seen since last Wednesday, as the uptrend from the November low has paused. Traders appear to be signaling there’s enough premium in deferred live cattle futures at this time.  

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