After the Bell: U.S/China Trade Talk Progress Supports Soy, Corn and Hogs

Posted on 02/15/2019 2:38 PM

CornCorn futures closed fractionally mixed in a quiet session of trading before the three-day weekend. March corn was unchanged Friday and up ½ cent for the week closing at $3.74 ¾. December corn also closed at $3.99 1/4, unchanged Friday and for the week. March corn tried to push higher overnight on signs of progress during the U.S./Chinese trade negotiations this week in Beijing with more talks planned next week in Washington. Comments from both sides on the progress toward a trade deal will likely continue to dictate price direction. This morning, the USDA reported that private exporters sold 205,744 metric tons of corn for delivery to unknown destinations during the 2018/2019 marketing year. On Feb. 22, USDA will release six weeks of delayed export data. A day earlier, USDA begins its annual outlook forum with the chief economist set to give some early estimates on planted acreage and ending stocks.  Brazil second-season corn planting is more than half underway, compared to 32% this time a year ago. Weather in March and April will determine the size of both the Brazil and Argentina crops after a strong start this year. Keep a watch on the wet soils across the southern and central U.S. corn growing region. The pattern is looks like it may continue in April and that could cause problems for getting corn planted in a timely fashion.  

Soybeans:  Nearby soybean futures prices closed up 3 to 4 cents today. Meal was up 40 cents to $2.20 in the nearbys, while bean oil finished 8 to 11 points higher in the two nearby contracts. For the week, March soybeans lost 7 cents. The soybean market got a bit of support Friday from a record NOPA crush report for January, at 171.63 million bushels. Combined with the positive news coming out of the U.S. and China trade discussions this week, look for selling interest to at least be limited next week, if not some modes upside price action. USDA’s Ag Outlook Conference starts next Thursday morning and runs through Friday. That, combined with next Friday’s USDA release of the Jan. 10 to Feb. 14 weekly export totals may provide a better picture of overall demand. Right now the export pace if far behind average and current USDA forecasts.  Presidents Trump and Xi want a trade deal and that is helpful for reaching a comprise deal down the road. Resolution of this matter could be friendly for soybeans and the ag markets, if only because the uncertainty of the matter will be eliminated. The potential of China pledging to reduce a good portion of the US/China trade deficit with larger U.S. commodity purchases remain a long-term positive. South American soybean harvests coming into the market in the coming weeks will limit U.S. exports.

Wheat: Winter wheat futures settled 2 to 5 cents lower today. Spring wheat futures ended mostly 1 to 2 cents lower. For the week, March SRW wheat dropped 13 cents and March HRW wheat fell 17 3/4 cents, while March HRS futures firmed 4 1/2 cents. Global wheat prices fell this week, which pressured futures. For a market that’s trying to attract more export demand, U.S. prices must work to stay competitive. If global wheat prices continue to drop next week, additional price pressure on winter wheat futures is likely. The other factor to watch next week is the U.S. dollar, which touched its highest level since mid-December before dropping today. Any additional strength in the dollar next week would likely pressure wheat futures. Spring wheat futures suggested with this week’s price strength in the face of falling winter wheat prices that the market may be starting to bid for acres. With winter wheat seedings coming in 838,000 acres lower than expected, HRS futures should try to keep acres from switching to other crops in the Northern Plains.  

Cotton:  Cotton futures dropped sharply on Monday and moved sideways the remainder of the week. Futures finished 9 to 17 points lower for the day, with the front-month notching losses of 233 points for the week. Lingering duties on U.S. cotton shipments to China have been a weight on the market. While other cotton users have upped their purchases of the U.S. fiber, the impact is still quite evident. Therefore, the market will remain tuned in to ongoing trade talks between the U.S. and China. The leaders of both nations have signaled they want a deal—upping the odds one will actually occur. But until then, buying interest in cotton may remain limited. The release of more than a month’s worth of delayed export sales data will also capture the market’s attention on Friday. We expect cotton acreage to come in around 14.4 million acres in 2019, up around 300,000 acres from the year prior. This figure lines up with findings from the National Cotton Council’s annual survey. But a lot can change on the acreage front based on weather, trade and prices.  

HogsLean hog futures prices closed up 82 1/2 cents in the April and up 52 1/2 cents in the June. For the week, April hogs gained $1.15. The hog market bulls are trying to stabilize the futures market after April futures prices this week hit an eight-month low. Support early next week is likely to come from a $2.00 jump in pork cutout values today, led by big gains in bellies.  Also, attitudes are upbeat after this week’s U.S.-China trade talks were deemed as making progress. A closed trade deal could improve Chinese demand for U.S. pork after African swine fever reduced that country’s herd.  A seasonal slowdown in hog slaughter in the weeks ahead should help the futures market to finally put in a low and move higher. Further progress on the U.S./China trade front would also likely give the market a needed boost.

Cattle:  Live cattle closed mixed and near midrange on Friday, with feeders closing lower. April live cattle closed down 20 cents at $127.175 and down 75 cents for the week. March feeders were down $1.475 on Friday to close at $142.60 and down $1.50 for the week. Slaughter slipped to 596,000 head from 620,000 a week ago and slightly higher than the 589,000 head a year ago. The slaughter appears to be slowing and combined with falling market weights will begin to constrict total beef supplies. Wholesale beef rose on Friday, with Choice up 87 cents and Select gaining $1.09. However, movement was light. Traders were still looking for a higher cash trade today and that should continue into month’s end as supplies tighten.  Focus during the next month will be feedlot conditions and how quickly they can recover from current muddy pens.

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