After the Bell: Grains, Soy End 2018 on the Defensive Waiting for U.S./China Trade Deal

Posted on 12/31/2018 2:18 PM

Corn: Corn ended fractionally on either side of unchanged. March futures ended 2018 at $3.75, compared with $3.93 ¾ a year earlier. Still on the weekly chart, futures were up 24 ¼ cents from a year earlier. Prices erased overnight gains tied to optimism that U.S./Chinese negotiators were making progress on ending the current tariff trade war. Much of the market remains skeptical the two sides will reach a deal ahead of new tariffs expected to start on March 1. Additional pressure stemmed from fund liquidation of long positions ahead of year-end. Ongoing weakness in crude oil prices and negative ethanol margins also weighed on prices. Corn inspected for export in the week ended Dec. 27 fell to 913,797 MT, down from 996,769 MT a week earlier. That was at the lower end of estimates calling for 850,000 MT to 1.1 million MT. Still, export inspections since Sept. 1 are up 71% from a year ago.

Soybeans: Soybean futures finished with fractional losses and in the lower end of today’s trading range. Meal futures finished $2.70 to $3.20 lower. Soyoil posted gains of 10 to 70 points. Soybean futures were firmer through the overnight session, but buyer interest dried up today. Traders showed no willingness to add new positions ahead of the New Year’s holiday given the lack of fresh USDA data amid the government shutdown. Focus will be on U.S./Chinese trade relations when traders return to work on Wednesday. President Donald Trump says “big progress” is being made in trade talks and a meeting is planned between trade officials of the two countries the week of Jan. 7. But without any fresh export sales data from USDA traders are unwilling to actively put money into the long side of the market. Weekly export inspections, which have continued during the shutdown were disappointing this morning at only 677,679 MT, which was below the bottom end of pre-report expectations.

Wheat: Winter wheat futures slumped 7 to 8 cents today. Spring wheat futures finished around a penny lower in most contracts. Fundamental news was lacking in thin, holiday trade, which limited interest in traders even covering short positions to close out the year. Pressure on winter wheat markets stemmed from concerns about the Comprehensive and Progressive Agreement for Trans-Pacific Pacific Partnership, or CPTPP, that went into effect Sunday. Traders fear the pact will make it harder for American wheat to compete globally, since the U.S. is not part of this deal. The market needs strong export news to alleviate demand concerns. Weekly wheat export inspections were just barely within the range of pre-report estimates at 376,281 MT and down 138,810 MT from the previous week.

Cotton: March cotton futures finished 1 to 19 points higher today, but ended 2018 near annual lows set last week. The market erased stronger gains early as the U.S. stock market failed to hold earlier advances.  Based on reports of progress in U.S./China trade talks, there is some hope China will return for purchases of U.S. cotton during the early days of 2019. China is likely to purchase ag goods ahead of a U.S. delegation that will be heading to Beijing next week. If that delegation produces additional progress, it’s likely that high-level Chinese leaders will be heading to Washington to meet with U.S. Trade Representative Robert Lighthizer by the end of January. The markets are taking a show-me attitude toward the talks, limiting buyer interest in cotton as the year ended.

Hogs: Lean hog futures finished 20 to 90 cents higher aside from the June contract that was 7 1/2 cents lower. Trade was relatively light today, with much of the price action centered on year-end positioning. Traders mildly covered short positions following the recent, sharp price pressure. Fundamental support for lean hog futures came from strength in the cash hog market. After modest gains in cash hog bids late last week, prices were firmer again this morning, with the average national direct price up 21 cents. Traders will closely monitor cash trade after Tuesday’s holiday to see if recent strength was temporary or if packers continue to raise bids. 

Cattle:  Expiring December live cattle futures rose to a new contract high at $125.575 with the remaining contracts trading both sides of unchanged and closing with mixed trends. Feeder cattle were down 22.5 cents to up 42.5 cents. Despite beef production rising 2.5% this year to the highest since 2002, the Choice cutout was $13 higher last week than a year ago. Steak features for New Year’s Eve celebrations were active across the nation. This year will be remembered for beef rising to new levels of appreciation and consumption, both domestically and globally. That demand has helped to easily move the largest supply of fed cattle through packing plants since 2011. It also helped to raise beef prices and packer margins and should maintain support for live cattle demand into 2019.

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