Ahead of the Open: Grains, Soy Slightly Firmer Ahead of U.S./China Trade Talks

Posted on 01/04/2019 7:52 AM

Grain Calls

Corn:  Steady to up 1 cent
Soybeans:  Up 2 to 4 cents 
Wheat: 2 to 5 cents higher

General Comment: Meetings on. Investors are cautiously optimistic today after news that U.S./China have officially schedule trade talks next week. Deputy U.S. Trade Representative Jeffrey Gerrish will lead a delegation to talk with Chinese officials on Monday in the first meeting of the two sides since a 90-day truce was agreed in Argentina last month. While the initial talks will be technical in nature, U.S. Trade Representative Robert Lighthizer is expected to meet with Chinese Vice Premier Liu He, President Xi’s top economic adviser, later this month, according Bloomberg News citing a person familiar with the matter.

China's central bank said on Friday it was cutting the amount of cash that banks must hold as reserves for the fifth time in a year, freeing up $116 billion for new lending as it tries to reduce the risk of a sharp economic slowdown.  Global stock markets sold off on Thursday after a warning from tech giant Apple Inc about slowing China sales, while data earlier this week showed the country's manufacturing activity shrank in December for the first time in over two years. Kevin Hassett, economic advisor to President Donald Trump, said Thursday that the slowing Chinese economy could hurt the earnings of U.S. corporations doing business there and increases pressure on China to make a trade deal. “If we have a successful negotiation with China then Apple sales and everybody else’s sales will recover, Hassett said. “But right now, China is feeling the blow of our tariffs.”

Global stocks in rally mode with the progress on U.S./China trade talks. Oil prices rose on hopes of recovery in the global economy. The government said this morning that U.S. employers hired the most workers since February and as wages rose. The report could help to allay a recent upsurge in fears about the economy's health that has roiled financial markets.  As the partial U.S. government shutdown reaches two weeks, President Trump will meet with congressional leaders on Friday. USDA reportedly will wait until late today or tomorrow to announce any delay in the key, price-sensitive Jan. 11 reports.

Corn is seen steady to firm on follow-through buying to strong close on Thursday and upcoming U.S./China trade talks. Corn heads for first weekly gain since Dec. 7.

Soybeans seen firmer on trade talk progress and talk of China buying earlier this week, which can’t be confirm with USDA export sales offices closed by the government shutdown. Soybeans heading to halt a three-week drop. South America weather is price supportive. A few thunderstorms dotted parts of Brazil yesterday, but most fields were dry and well-organized rain did not occur. More scattered storms will pass over much of Brazil through Sunday and followed by much drier and hotter weather. Coverage and amounts the next three days and length of upcoming dry period are key to prices next week. Argentina remains wet, with a few issues starting to develop.

Wheat futures are headed for best weekly gain since Dec. 7. Prices are supported by signs global buyers are ready to increase purchases of competitively-prices U.S. supplies.

Livestock Calls

Cattle: Steady-firm

Hogs: Steady-firm

Cattle futures steady to firm with futures overbought and likely to see some profit taking on an early rally. Cash cattle trade was moderately active across the Southern Plains yesterday near $123, steady to firm with prior week’s trend. While wholesale beef movement was strong at 149 loads yesterday, prices dropped, with Choice down 15 cents and Select $1.53 lower. Relative steady choice is a positive sign as its premium to Select was too narrow.

Hog futures seen steady to firmer as wholesale pork sales continue to be active. Although packers lowered prices to move the pork, slaughter was very active at 476,000 head, up from 439,000 a week earlier. Packers need hogs and yesterday the national average cash bids firmed another 85 cents, extending the string of cash market gains to five days. China warned the country's pork industry that covering up cases of African swine fever is a crime, days after a dead pig was found on a Taiwanese beach prompting Taipei to claim Beijing was not sharing accurate information on the disease. Failing to report deaths and privately slaughtering and selling sick or dead pigs would be pursued under criminal law, it said, and compensation of 1,200 yuan ($175) for each pig culled was enough incentive for farmers to report the disease.  

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