After the Bell: Soybeans, Grains Rise on Optimism China Will Start Buying U.S. Ag Products

Posted on 12/04/2018 3:14 PM

Corn :  Corn futures posted gains of 1 1/4 to 3 cents through the September contract. December 2019 corn futures finished 1/4 cent higher. Futures end on or near session highs. Corn futures were anchored near unchanged for much of the day, but caught a late bid on spillover support from strength in soybeans, a weaker U.S. dollar and a sharp plunge in the U.S. stock indices. Weakness in the wheat market and uncertainties with the specifics of the trade truce with China limited buyer interest for most of the day. The high-range close sets the stage for followthrough buying, though some outside influences would likely be needed for sustained buying to be seen. Funds covered more shorts in the corn market today after futures entered but didn’t fill Monday’s gap on the daily charts. Managed money accounts were short about 31,000 contracts of corn futures as of Nov. 27, according to Commodity Futures Trading Commission data. But a good portion of those shorts have been covered on the rebound from the Nov. 27 low.

Soybeans:  Soybean futures closed up 5 to 6 through the January 2019 contract and finished nearer their daily highs. Meal futures closed mostly 30 to 60 cents higher, while soybean oil futures were up 30 to 33 points. Bean oil contracts hit five-week highs today. Today’s high-range close is a win for the soybean bulls but the key is a move above Monday’s highs to attract additional fund short-covering and fresh speculative buying.  Still, look for more choppy trading conditions until there are actual new sales of U.S. soybeans announced to China. “We expect to make a lot of progress” on trade negotiations within the first 90 days of the U.S./China trade truce that began Dec. 1, Treasury Secretary Steven Mnuchin said this morning. Mnuchin said agriculture will be first up in trade talks with China. "Our expectation is that there will be specific deliverables" and timelines from China, and "without reciprocal tariffs.” President Trump said in a twitter post today that “China is supposed to start buying agricultural products and more immediately. President Xi and I want this deal to happen, and it probably will.”

Wheat:  Winter wheat futures were mixed today, with SRW closing mostly higher and HRW finishing 1 to 3 cents lower, with both markets closing near session highs. Spring wheat futures closed down 2 ½ to 4 ½ cents. The wheat market continues to find support from stronger soybean and corn prices and hopes that Russian export supplies will soon dwindle, boosting demand for U.S. supplies. However, prices were defensive to start the day after Russian wheat was the cheapest offered in a tender from Bangladesh on Tuesday. Last week’s export sales report will be out on Friday morning. Wheat inspected for export last week improved, according to USDA data released on Monday. Ukraine said on Tuesday it had resumed grain shipments from the Azov Sea, blocked for around 10 days after a military standoff with Russia in the Kerch Strait off Crimea. Russia seized three Ukrainian naval ships and their crews on Nov. 25 after opening fire on them, accusing them of illegally entering its territorial waters.

Cotton:  Cotton futures posted losses of 9 to 14 points through the July contract. December 2019 futures ended unchanged on the day. Futures finished near midrange. Cotton futures faced followthrough selling after Monday’s poor close. But seller interest dried up late, despite Monday’s chart gap being filled. That suggests sellers may have become exhausted, though a push above Monday’s high is likely needed to attract fresh buying. Uncertainties surrounding the specifics of the trade truce between the U.S. and China could potential cripple near-term price action. Traders want to see Chinese importers show up as buyers of U.S. cotton before they get too excited. But the prospects for a resolution to the trade war should limit selling. Bottom line: Choppy trade is likely until more is known on the trade front.

Hogs:  Futures ended steady to mostly lower, with much of the weakness in the front of the market. February futures fell 85 cents to close at $66.05, with June unchanged at $83.175. The industry remains confused about what the Chinese agreed to buy and how soon at Saturday’s trade truce with the U.S. Uncertainty has created a selling sentiment until new sales are announced. Brazil consultant Celeres said today that China will buy more meat from Brazil because of the outbreak of African swine fever.  USDA export sales for last week will be released on Friday and that will be closely examined for any new business with China. Last week, USDA reported that pork export sales in the week ended Nov. 22 rose 7% above the four-week average, with China taking 3,300 metric tons of the 20,900 MT sold in the week. That’s about 7.2 million pounds and the first sale in a while. China also bought 9,400 MT of U.S. pork for delivery in 2019. Sharp losses in U.S. stock prices today also encouraged funds long liquidation.

Cattle:  December live cattle futures closed near the session high and up 90 cents. The February contract finished up $1.475. Contracts hit a four-week high today and closed near their daily highs. Feeder cattle futures closed down 10 cents in the January and up 40 cents in the March. The March feeder contract hit a seven-month low today. Recent strength in boxed beef values and strong retailer demand boosted live cattle futures today. Choice boxed beef values firmed $1.11 this morning, but Select was off $1.63. Movement was a stout 99 loads after a strong performance Monday.Cash cattle trade has yet to get underway this week. Last week, cash trade ended on an upswing with an average price of $117.10. Traders are waiting to see if packers will raise cash bids again given strength in the beef market and strong cutting margins—at more than $150 per head. Packers are quiet to start this week but may need some cattle to fill beef orders for this month. 

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