After the Bell: Beans Slide on China Trade Deal Delay, Grains Continue Short-Covering Rebounds

Posted on 03/14/2019 3:14 PM

Corn: Corn futures settled in the upper half of today’s trading range with gains of 1 ¼ to 4 ¼ cents. Nearby futures led to the upside. The coming growing season is finally getting a bit of attention, with many weather watchers saying that recent excessive cold and snowfall likely pave the way for flooding and a slow planting season. Yet another winter storm in the western Corn Belt this week makes it tough to believe spring is around the corner. These budding weather concerns likely encouraged funds to cover some of their large net short position today, despite some disappointing trade data. USDA’s export sales report for the week ending March 7 showed old-crop sales well short of expectations at just 372,000 MT. Sales of 474,600 MT for 2019-20 were stronger than anticipated, but sales for the current marketing year are the greater focal point. Export commitments are now running 6% behind year-ago levels, whereas USDA is calling for a 2.6% drop. Meanwhile, trade relations with China remain a question mark. President Donald Trump says talks are going well, but he also says he’s willing to walk away from a deal if need be. Some sources are saying the leaders of China and the U.S. may not meet until May, while others say a late-March confab is still a possibility.  

Soybeans: Futures halted two days of advances, closing lower after earlier rising to a one-week high. May futures fell 2 1/2 cents to close at $898 1/2.  May soybean meal was up $1.20 to $305.90 per 2,000 lbs. and soybean oil fell 36 points to 29.89 cents. Soybean export sales in the week ended March 7 rose to 1.912 MMT, topping estimates for 1.2 to 1.9 MMT last week, USDA data this morning showed. China bought 1.708 MMT last week. Cumulative sales are slowly reducing the deficit compared with the average pace of exports but remain about 4.7 MMT behind. Sales can still catch up to the USDA forecast with continued large Chinese purchases. Falling export prices in Brazil will make that target more difficult to reach until there is a trade deal that include a pledge from China to buy substantial 2018-19 supplies. Soybeans turned lower earlier this morning after President Donald Trump said he was in “no rush” to reach a China trade deal and might walk if the deal is not a good one for the U.S.  On Friday, the National Oilseed Processors Association will release their latest soy crush. The trade is looking for 158.7 million bu. of soybeans crushed in February. If realized it would be a record crush for the month.  

Wheat: Soft red winter wheat futures prices closed up 5 ½ cents in the May and up 4 1/2 cents in the July. Hard red winter wheat futures finished fractionally lower in the nearbys. Spring wheat closed about 2 cents higher. The world supply and demand front at present still favors the wheat market bears but offset by speculation the wheat market has been pressured below fair value recently. USDA this morning reported wheat sales last week were just 263,000 MT for 2018-19, well below trade estimates for 400,000 to 600,000 MT of new business. It also reported 83,000 MT in sales for 2019-20 delivery. Germany's 2019 wheat harvest will rise by 19.4% to 24.20 MMT from last year’s drought-reduced crop, the German association of farm cooperatives said on Thursday in its first forecast for the new crop. Ukraine will likely produce a 28.3 MMT wheat crop in 2019, according to the analysts ProAgro. This is up 700,000 MT from its previous estimate.  Given today’s news which favored the bears overall, the wheat futures markets performed better than expected. When a market fails to respond to fundamental news in the direction expected, it usually marks a change in trend. With funds sitting at near record net-short positions, it appears they are getting a little uncomfortable with their large bearish bets.

Cotton: Futures halted a two-day advance to a six-week high. May futures fell 142 points to close at 74.30 cents. Cotton prices fell after reports that a U.S./China trade deal is likely to be delayed until April. President Donald Trump again indicated talks with China on trade issues are "going well" but also said he was in no rush to get a deal and might walk if the deal is not a good one for the U.S. As for the prospect that Trump could walk away from the deal, Trump said, “I think President Xi saw that I’m somebody that believes in walking when the deal is not done, and you know there’s always a chance it could happen and he probably wouldn’t want that." Indications are that China would like to see the deal completed before Trump and Xi meet to finalize it. Meanwhile, Bloomberg is reporting that unnamed sources say any such meeting won’t occur until April at the earliest. U.S. exporters sold 166,100 bales in the week ended March 7, including 49,500 bales sold to China.  Sales increased from 114,028 sold a week earlier. Cotton sales and shipments through last week were still 12% behind a year ago and slightly behind the pace to reach USDA’s forecast for the marketing year.

Hogs: April lean hog futures closed up $2.25 and closed at a seven-week high today, while the June contract gained $2.65 and hit a three-month high. Improving cash market fundamentals continue to drive hog futures prices higher and suggest more gains are possible in the near term. Today’s weekly USDA export sales report provided a positive demand surprise. USDA said 50,300 MT of pork were sold in the week ended March 7. More important, China bought 23,800 MT last week. The national average cash price rose 89 cents on Wednesday. That follows a surge of $2.42 on Tuesday. Fresh pork carcass values rose 86 cents today, reaching the highest since Feb. 4, on movement of 178.89 loads. The pace of slaughter is slowing, up 2.3% this week, but down from more than 5% the past two months. On the U.S.-China trade front, President Donald Trump said he is in 'no rush' to reach a deal and might walk away if the deal is not a good one for the U.S. “

Cattle: Live cattle futures posted gains of 57 1/2 cents to $1.025 through the December contract, which was high-range in most contracts. Feeder cattle futures were 27 1/2 to 72 1/2 cents higher in all but the soon-to-expire March contract, which finished 45 cents lower. Cattle were supported by strong spillover from the hog market as futures recouped more of Tuesday’s sharp losses. Fundamental support came from inclement weather and poor feedlot conditions across the Plains and Midwest. As a result, traders pushed April live cattle back in line with this week’s initial cash trade around the $127 level after the lead contract slipped to a discount earlier this week. Despite the poor weather, traders seem hesitant to put premium into the market, signaling they sense a seasonal market top is either in place or close. To fuel a run to new highs in futures, the cash and product markets likely need to lead the charge. Wholesale beef prices have been strong, but softened this morning and movement has been light, suggesting retailers may have their pre-Easter needs covered.

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