Ahead of the Open: Hopes for U.S./China Trade Deal Supportive For Grain, Soybean Futures

Posted on 05/15/2018 8:01 AM

Crop calls

Corn: 1 to 2 cents higher
Soybeans: Steady to 1 cent higher

Wheat: Steady to 2 cents higher

Grain and soybean futures were firmer for much of overnight trade, though soybeans slipped to a mixed tone at the end of the session. We expect a slightly firmer tone when daytime trade starts.

The U.S. and China are putting the final elements together for a possible trade deal as the two sides meet for trade talks starting today in Washington. China is reportedly willing in principle to import more U.S. ag products in return for the U.S. smoothing penalties against ZTE Corp. That should support grain and soybean futures this morning. But until a final deal is reached, buying may be limited, as there are likely to be some setbacks in trade talks – there almost always are.

A sharply higher U.S. dollar is price-negative for grain and soybean futures and likely to limit buyer interest this morning. A key level to watch will be last week’s high in the dollar index. If that level is taken out, it could fuel an even stronger advance in the greenback.

Planting progress data yesterday was more advanced than traders expected for corn, soybeans and spring wheat. Planting progress is not a concern for traders.


Livestock calls                                                                      

Cattle: Lower
Hogs:  Higher

Live cattle futures are likely to face followthrough selling after yesterday’s sharply lower close. With the June contract ending limit down Monday, daily trading limits expand to $4.50 today. But barring active followthrough selling, we wouldn’t be surprised to see corrective buying surface, as wholesale beef prices were firmer yesterday and futures continue to trade severely below the cash market.

Lean hog futures are expected to open with a firmer tone after moderate to strong gains and a high-range finish in all but the May contract yesterday. Support will come from the 86-cent rise in the average cash hog price and a 38-cent increase in the pork cutout value. But the big premiums summer-month hogs hold to the cash index are likely to limit buyer interest.


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