Ahead of the Open: Corn, Soy Seen Firmer on China Trade Talk Progress

Posted on 02/15/2019 7:01 AM

Grain Calls

Corn: Steady up 1 cent
Soybeans: Up 3 to 5 cents
Wheat: Down 1 to 2 cents

General Comment:  Corn, soy and stocks are slightly higher on Friday as U.S.-China trade talks showed signs of progress. But caution remains as the finish line for completing a deal still appears out in the future. That because both sides don’t want to give up too much to complete the deal.

Chinese President Xi Jinping told top U.S. trade negotiators on Friday that trade talks this week made important progress and that efforts would continue in Washington next week to resolve the trade war. Xi met U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin after a full week of trade negotiations at senior and deputy levels in Beijing, and called for a deal both sides could accept, state media said. "Next week, both sides will meet again in Washington. I hope you will continue efforts to advance reaching a mutually beneficial, win-win agreement," Xi said during a meeting at Beijing's Great Hall of the People. "We feel that we have made headway on very, very important, and very difficult issues. We have additional work to do but we are hopeful," Lighthizer said. The White House this morning confirmed talks will continue next week in Washington and lopes to see additional progress.

Neither country has yet offered new details on how the world's two largest economies might de-escalate the tariff war that has roiled financial markets and disrupted manufacturing supply chains. Several sources informed about the meetings told Reuters there was little indication negotiators had made major progress on sticking points to pave the way for a potential meeting between Xi and Trump in coming weeks to hammer out a deal. "There's still a lot of distance between parties on structural and enforcement issues," one source told Reuters. "I wouldn't quite call it hitting a wall, but it's not a field of dreams either."

Corn market seen slightly higher after trading lower overnight and uncovering active buying interest. 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. Below-normal monsoon rains and an infestation of the fall armyworm have slashed India's corn output and boosted prices, increasing the chances the government will grant duty-free corn imports for the first time since 2016. The shift to imports in the world's seventh-largest corn producer, which typically exports to Asia, highlights the breadth of the crop losses due to the drought and potential new U.S. exports.

Soybeans seen higher on China trade talk progress but gain continue to be held in check. U.S. soybean exports won't return to their pre-trade war levels until the 2026-27 season as competitors in South America gain global market share; that's according to USDA projections released Thursday. While China has recently resumed buying U.S. soybeans, that hasn't moved prices because of uncertainty on trade relations going forward. Brazil could double its budget for subsidizing farm insurance in 2020, the country's agriculture policy secretary said, seemingly running counter to the new government's pledge to slash public spending in the face of mounting debt. NOPA members likely crushed a record 169.575 million bushels of soybeans last month, according to an average of estimates given by 10 analysts in a Reuters survey. Report is scheduled for 11 a.m. on Friday.

Wheat futures will open on the defensive after the weak closes Thursday and further weakness in European futures this morning.

Livestock Calls:

Cattle: Steady to weak

Hogs: Mixed to firmer

Cattle futures seen slightly defensive after wholesale beef prices losses on Thursday on light sales. Choice slipped 37 cents and Select fell $1.60. The Choice/Select spread has been widening, a slightly positive development. Packer margins are down about $10 to $64 a head this week. Slaughter the first four days of this week is down 6,000 head to 459,000 head from a year ago.

Hog futures are seen steady to firm after cash hogs rose on Thursday. The national average price rose 35 cents and Iowa/Minnesota hogs were up 80 cents. However, wholesale pork carcass was marked down $1.12. mostly tied to renewed weakness in bellies. Slaughter this week is estimated at 1.831 million head, down 26,000 head from a year ago, mostly due to one plant slowdown early this week that they plan to make up on Saturday.

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