After the Bell: Strong Weekly Soybean, Grain Rallies on U.S./China Trade Truce, Improved Exports

Posted on 12/07/2018 2:35 PM

Corn:  Corn futures finished higher and near both session and weekly highs. March corn was up 2 ¾ cents to close at $3.85 3/4. Prices closed up 7 ¾ this week, confirming last week’s reversal-up buy signal. More important, prices left a 2-cent upside gap on the weekly chart from $3.78 to $3.80. Today’s strong finish will keep a positive technical bias to early trading next week. USDA said private exporters sold 1.178 million metric tons of corn in the week ended Nov. 29, up 58% from the prior four-week average. Shipments since Sept. 1 are up 83% from a year ago at 14.768 MMT. Combined shipments and sales not yet shipped are 17% ahead of a year ago. With this week’s rally, overseas buyers may increase forward purchases amid more positive technical signals. The U.S. dollar fell against a basket of currencies and posted its biggest weekly drop in two months. A weaker dollar will aid overseas demand for U.S. supplies. The dollar probably needs to weaken a bit further for speculative computers to start buying more contracts.  

Soybeans:  Soybean futures settled mostly around 6 to 7 cents higher today. Meal futures closed 60 cents to $1 lower, while soyoil posted gains of 3 to 9 points in most contracts. For the week, January soybean futures finished 22 cents higher. Soybean futures firmed today on hopes China will soon buy U.S. soybeans. One of our China watchers says Beijing has given the green light for state-owned firms to buy 5 MMT of U.S. soybeans, though for which crop year was unknown. It will likely take confirmation of China buying U.S. beans and/or lifting the 25% tariffs to push futures above the Dec. 3 highs. Bulls must keep the Dec. 3 upside price gap open to avoid a fresh wave of selling. USDA’s Dec. 11 reports will not feature an updated soybean crop estimate, but traders will watch to see if there are any changes to the usage forecasts or South American production. When, how much and for what crop year China makes purchases of U.S. soybeans will be key to the longer-term price outlook.  

Wheat:  March SRW wheat closed up 15 3/4 cents today, hit a five-week high and closed at a technically bullish weekly high close. March HRW gained 16 1/2 cents and closed at a bullish weekly high close while hitting a three-week high. For the week, March SRW gained 15 1/2 cents, while March HRW was up 11 3/4 cents. March HRS futures firmed 12 1/4 cents today and were up 5 3/4 cents for the week. The first signs of improved export demand for U.S. wheat have quickly forced the speculative shorts to cover large bets that were made on lower prices. The strong finish to the week suggests there will be followthrough buying strength early next week. For the week ended Nov. 29, USDA said exporters sold 711,800 MT of U.S. wheat, jumping 58% from the prior four-week average. It was the best weekly sales since Aug. 9. Also, the daily USDA reporting service said private exporters sold 224,000 MT of hard red winter wheat for delivery during 2018-19. With Russia quickly depleting exportable surpluses and its domestic flour prices rising, there may be a greater shift to U.S. and other global supplies in the coming weeks.

Cotton:  Cotton futures settled with gains of 115 points in the March contract. The May through December 2019 contracts finished 55 to 91 cents higher. For the week, December cotton futures firmed 132 points. The highly choppy trade in the cotton market this week signals traders are waiting on more details of the trade truce between the U.S. and China. They will want to see China purchase U.S. cotton before they get too excited, but the cease-fire is somewhat supportive. USDA’s December crop report on Tuesday will feature an updated U.S. crop estimate and new ending stocks forecasts for the U.S. and world. India could see its cotton production drop more than 12% as limited rainfall in the top two production states. A sharp reduction in India’s production will lower its exports, opening the door for more shipments from the United States. If there’s a deal with China, it would open even more export potential for U.S. cotton.  

Hogs: February and April lean hog futures gained 97 1/2 cents and $1.05, respectively, and closed at technically bullish weekly high closes. For the week, February hogs were up 32 1/2 cents.  Lean hog futures were higher today on positive export news and on a big rise in cutout values late this week. The pork cutout was up $3.19 this morning, led by big gains in bellies. Good pork product movement this week and the bullish weekly high close today should provide decent follow-through buying in hog futures early next week. If the pork market can remain strong, it would increase odds of a rebound in the cash hog market once the peak in hog supplies is worked through. USDA reported export sales of pork at 20,000 MT for 2018, up 4% from the prior 4-week average. Of note, China purchased 2,400 MT, fueling Chinese demand hopes in the coming weeks, especially given that country’s recent struggle with African swine fever. USDA also reported October port exports were record-large for the month.  

Cattle:  Cattle futures closed mixed on Friday and higher for the week. February cattle were down 27.5 cents to $121.525 on Friday, paring its weekly gain to $1.025. January feeder cattle rose 17.5 cents on Friday to close at 144.375, paring its weekly loss to 85 cents. February cattle rose this week to the highest price in more than a month on stronger wholesale beef sales and firming prices. Sales slowed, and beef prices turned a bit softer at week’s end.  This week range from $119.825 to $122.55 will be support and resistance next week amid what should reflect slowing seasonal demand into year end. Market-ready supplies are beginning to tighten, and the market was still waiting to see if packers paid higher money for a second straight week by early Friday. The fed cattle slaughter during Thanksgiving week was 463,000 head, 3,000 less than last year.  This morning’s export sales report from USDA delivered more cancellations than sales, tallying a net-sales reduction of 100 MT for 2018. But 2019 sales were at 12,900 MT.  A weaker dollar should help to boost exports into 2019. U.S. unemployment is holding at a 49-year low, supportive for domestic beef demand into the new year.  

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