Ahead of the Open: Optimism on U.S./China Trade Truce Lifts Grains

Posted on 11/28/2018 8:07 AM

Grain Calls

Corn:  Up 1 to 2 cents    
Soybeans: Up 4 to 6 cents
Wheat: Steady to up 3 cents

General Comment: U.S. stock futures are trading higher, tracking world shares as trade tensions eased ahead of the Saturday meeting between the U.S. and Chinese presidents at a G20 summit. China will increase access to foreign investors and will boost its protections on intellectual property, Chinese President Xi Jinping said in Spain today. Meanwhile, Chinese state television reported the country would further improve its business environment as it seeks to boost domestic and foreign investment. Trump will arrive at the talks with a fragile coalition of international allies backing his position – even as European and Japanese officials say their cooperation with the White House could collapse should the U.S. proceed with new auto tariffs. The summit will expose the broad fault lines now running through the decades-long global rules-based trading system. China is going to this week's G-20 summit hoping for a deal to ease a damaging trade war with the United States, Beijing's ambassador to Washington said on Tuesday, while warning of dire consequences if U.S. hardliners try to separate the world's two largest economies. The dollar was little changed ahead of Fed Chairman Jerome Powell’s speech at noon in New York, as traders wait for signals on the extent of future interest rate hikes. The dollar has been under pressure in recent weeks on signs the Fed might slow the pace of interest rate hikes amid slowing global growth and escalating trade tensions.

Corn is seen firmer on light short covering and some signs of improving export and domestic demand following recent losses. The Trump Administration has temporarily frozen a program meant to exempt small oil refineries in financial distress from the U.S. biofuels law, as it reviews the scoring system to evaluate applications, two sources familiar with the matter told Reuters. The review means changes are likely to the program. Declining ethanol blending and weak biofuel margins have been a drag on corn the last two weeks as crude oil tumbled.

Soybeans are seen firming as funds further liquidate short positions ahead of the weekend meeting between Presidents Trump and Xi. Whether a truce can be struck continues to be hotly debated. Still, it would seem that China will have to follow Trump’s demands for opening markets and protecting intellectual property rights for trade talks to make progress this weekend. USDA announced this morning that private exporters sold 268,748 metric tons for delivery before Sept. 1 to unknown destinations. The sale will add support to early trading. South America weather remains favorable the next 10 days, limiting rallies.

Wheat futures are finding support from signs of a bottom on the charts amid ongoing expectations for an improvement in global demand for high-quality wheat supplies. For a second session HRW wheat is gaining on SRW after reaching near-record discount last week. HRW will need to lead rallies. Ukraine President Petro Poroshenko says his country might end up in a full-scale war with Russia after a maritime clash between the two countries over the weekend. Russia said today it planned to deploy more missiles in Crimea amid rising tensions. Martial law has not impacted Ukraine grain exports from ports, the acting ag minister said today. Still, Russia and Ukraine have been in a long-simmering conflict since the Russians annexed Crimea in 2014. Trump told the Washington Post on Tuesday he could cancel a meeting with Russian President Vladimir Putin at the G20 summit but was awaiting the full report on the conflict.

Livestock Calls

Cattle: Steady to firm

Hogs: Steady to firm

Cattle futures are seen steady to firmer after prices pared losses after bouncing away from support on Tuesday. Improving wholesale beef sales Tuesday after two sessions of slow demand will add fundamental support. Beef prices were mixed Tuesday with Choice down 45 cents and select gaining 45 cents. A winter storm is probable for cattle in Nebraska, South Dakota, and parts of Kansas Friday-Saturday

Hog futures seen steady to firm as slaughter this week is running lighter than expected. While the cash market is softening this week, the pork cutout value firmed 5 cents Tuesday, mostly because loin prices surged $3.22 and butts rose 72 cents, offsetting losses in other cuts. Pork movement was strong at 447 loads of 40,000 pounds.

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