After the Bell: Corn, Soybeans Ease Ahead of China Deal Signing; Wheat Rallies on Russian Export Quota talk

Posted on Tue, 01/14/2020 - 14:31

Corn: March corn futures closed down 1/2 cent at $3.89 and December also lost 1/2 cent to $4.04 1/4.  Prices slipped into the close after earlier rising to a new seven-session high as everyone is trying to position for what they think China will buy following Wednesday’s expected Phase 1 trade deal signing. Some expect China to start buying and adhere to rumored quarterly purchase commitments under the deal.  Ethanol and DDGs may be at the top of the Chinese buying list, but no one knows. Rumors that China was asking for prices for Ukraine corn added to the negative late-day tone. Late-session headlines that U.S. tariffs targeting Chinese goods will stay on through the 2020 election even as both sides get ready to sign a “Phase One” trade deal added some pressure but was not fresh news.  South American weather leans negative with rains this week in Brazil and next week in Argentina. Safrihna harvest-delivered cash corn bids reached 40 reals per bag for July through August delivery – a new record. The incentive for Brazilian farmers to plant record acres of second-season corn are increasing and may limit gains in U.S. futures.  

Soybeans: January soybeans expired ¾ cent lower at $9.28 ½ today. Deferred months ended in the lower half of their two-sided daily trading range, with futures steady to fractionally lower. Soybean meal posted solid gains and soybean oil was able to finish modestly higher after an early drop to a one-month low. Soybean futures spent the day trading inside of Monday’s trading range as the market looked ahead to the much-anticipated signing of a Phase 1 trade deal with China and the corresponding release of the agreement text. Specific commodity purchase amounts will not be included, as China maintains the $80 billion in purchases of U.S. ag goods over two years must be market-driven and in order to avoid challenges at the World Trade organization. News today that existing tariffs on $370 billion worth of Chinese goods would remain in place at least through the November elections caused commodities to soften into the close, though administration officials and the president have indicated those tariffs would remain in place for some time to ensure China follows through on its commitments. See “Evening Report” for more.

Wheat: Winter wheat contracts posted gains of 4 to 6 cents today, with SRW contracts mildly outpacing HRW futures. Spring wheat futures finished steady to fractionally lower in most contracts. Wheat futures were buoyed by reports Russia’s ag ministry wants to set non-tariff quotas on grain exports the first half of 2020 (the second half of the 2019-20 marketing year). That could slow wheat shipments from the country through June. But Russian shipments typically slow the second half of a marketing year anyway. Plus, there’s plenty of wheat in the other Black Sea countries and European Union (primarily France) to continue to fill the global value-buyer market. Therefore, the U.S. isn’t likely to pick up a lot of export business if Russian exports slow. However, the U.S. is well positioned against Canada and Australia to see improved demand for higher-quality wheat. And it would be much bigger news is Russia would extend any export quota to the 2020-21 marketing year.  

Cotton: March cotton futures ended the day with a loss of 15 points in the March contract, to 71.38 cents. December cotton closed down 23 points at 72.51 cents. The cotton market was holding around steady levels or just above unchanged in late futures trading Tuesday when some news services reported the U.S.-China partial trade agreement, set to be signed in Washington, D.C. on Wednesday, will include a provision that at least some U.S. tariffs on Chinese imports won’t be lifted until after the U.S. presidential election next November. Those news headlines pressured the U.S. stock indexes, which in turn could have put a bit of pressure into the cotton futures market. However, some market watchers reminded that the timing of the lifting of U.S. tariffs on China had been known for quite some time. Traders will be watching on Wednesday for any more specifics on U.S. ag purchases coming from China on the expected day of signing of the trade deal.

Hogs: Hogs closed higher and are now higher for the week. February hogs rose $1.775 to $67.675, with April gaining $1.625 to $75.00. Prices rose on optimism pork will top China’s shopping list when they start buying U.S. farm products. China and the U.S. are scheduled to ink a Phase 1 agreement Wednesday. Yesterday, the U.S. agreed to remove China from a list of currency manipulating countries as part of the deal. But according to a late-session Bloomberg News report, both countries understand the U.S. will review and possibly trim existing tariffs and levies no sooner than 10 months after the deal is signed. Midday wholesale pork cutout values rose 28 cents as gains in ribs, hams and bellies offset weakness in picnics and butts. Midday sales were moderately active and provided support to futures.  

Cattle: February live cattle futures closed up $0.30 at $126.85 today, while April live cattle ended up $0.35 at $127.875. March feeder cattle futures closed down $0.125 at $145.725. The cattle futures markets are in a holding pattern at higher price levels early this week. Light sales of live cattle at steady prices last week has increased speculation that packers this week will be reluctant to bid higher for cattle. However, firmer beef prices early this week add support to signs the beef market is bottoming. The noon beef report Tuesday showed Choice cutout value rose a solid $2.60 and Select was up $1.84 on light sales of 58 loads. The Choice-Select spread was $3.08.  Dressed weights did slip 3 pounds in the week ended Jan. 4., but they are still up 3 pounds from a year ago. China beef imports in December climbed almost 81% to 189,000 MT from a year earlier and also topped November imports of 186,984 MT. Total 2019 beef imports rose nearly 60% to 1.66 million MT.