Choppy trade for corn and beans as trade looks ahead to Phase 1 trade deal… Corn and soybean futures saw choppy trade overnight as trade readied for details regarding the Phase 1 trade deal with China. Corn is steady to fractionally lower and soybeans are narrowly mixed with a downside bias. Winter wheat futures are 1 to 4 cents higher amid followthrough buying that saw March SRW wheat futures notch six-month highs on Tuesday. Spring wheat futures are up a penny. The U.S. dollar index is down slightly, with crude oil futures just above unchanged.
Phase 1 trade deal with China will be signed today… President Donald Trump and Chinese Vice Premier Liu He are expected to sign a Phase 1 trade deal at 10:30 a.m. CT, with the text of the agreement expected to be released around the same time. The deal reportedly includes Chinese commitments to purchase at least $80 billion worth of U.S. agriculture goods over the next two years. Language regarding the purchases and enforcement mechanisms will be scrutinized. A confidential annex with detailed purchase commitments won’t be released, and skepticism continues on whether China will fulfill farm product purchase commitments. We’ll have coverage of the deal on our website and in “Evening Report.”
The U.S., EU and Japan increased pressure on Beijing over its model of state-sponsored capitalism, calling for tougher World Trade Organization (WTO) curbs on government subsidies… The three issued a joint statement on Tuesday on a proposal for more stringent global rules to prevent Chinese companies relying on state support to gain advantage over foreign rivals. The proposed rule changes take aim at core parts of China’s economic model, calling for a wider World Trade Organization (WTO) ban on various types of state support and for governments to do more to prove that aid to companies does not distort trade. The agreement could help the Trump administration deflect criticism that its deal with China fails to address industrial subsidies and that the U.S. has not sufficiently worked with its allies to pressure Beijing. Brussels hopes the proposals can be a first step in a wider reform effort at the WTO.
December NOPA crush expected to hit second highest mark on record for the month… Members of the National Oilseed Processors Association (NOPA) who account for the vast majority (around 95%) of U.S. crushers likely processed 171.644 million bu. of soybeans last month, according a Reuters poll of analysts. This would be the second largest December crush on record, coming in just under the December 2018 record of 171.759 million bushels. Our analysis signals last month’s crush could come in even higher, at a record-setting 174 million bushels. Soyoil stocks will likely come in around 1.507 billion lbs. for the end of December, a 59 million-bu. increase from the month prior and a 9 million-bu. increase from year-ago, according to the survey. The report will be released at 11:00 a.m. CT.
Remaining Senate committees will vote on USMCA today; chamber vote Thursday… The Senate Appropriations, Foreign Relations, Commerce and Health, Education, Labor and Pensions Committees hold markups today to vote on the U.S.-Mexico-Canada Agreement (USMCA). That clears the way for the chamber to take the agreement up, with Senate Majority Leader Mitch McConnell (R-Ky.) saying they will do so Thursday. Passage is expected. The House has already cleared the measure.
French soft wheat exports outside the EU continue to climb… The French farm office FranceAgriMer raised its forecast for French soft wheat exports outside the EU for the fourth time in a row, adding another 200,000 MT to its outlook that now stands at 12.4 MMT. This would be a 28% surge from the previous season. France harvested its second largest wheat crop on record in 2019-20. In addition, the country is facing less competition than it usually does from Russia, and China has been buying an unusual amount of French wheat, bolstering sales to date. But FranceAgriMer also lowered its outlook for exports within the EU, resulting in no change to its ending stocks projection of 2.4 MMT. Also of note, the farm office reports several animal feed factories have been halted since Friday as the pension reform strike has disrupted transport.
Rising sugar prices has Brazilian mills considering shifting some ethanol production to sugar… Sugar futures prices have climbed 9.1% since the start of the year, reaching two-year highs and giving Brazilian sugar mills additional incentive to consider shifting some production to raw sugar production at the expense of ethanol. This would be a reversal of the trend, as mills’ use of cane for sugar production hit an all-time low of 34% this season amid rising demand for the biofuel. William Hernandez, a partner at FG/A, a consultancy advising mills on their commercial strategies, says the current raw sugar price of 14.32 cents per lb. isn’t quite low enough for mills to start switching, but higher prices should encourage mills to sell futures to lock in the gains. Some analysts say prices need to be quite a bit higher than 15 cents per lbs. for ethanol plants to increase raw sugar production at the expense of ethanol.
Another bird flu outbreak in Hungary… A second outbreak of H5N8 bird flu has been detected at a large duck farm in eastern Hungary, the country’s food safety authority announced today. This comes two days after Hungary’s first outbreak since 2016 was reported. All of the farm’s 115,000 birds are being culled. The country’s food safety authority said that migration of wild birds is likely helping to spread the virus by contaminating waterways used by farm birds. So far, the highly pathogenic virus that’s spreading in Poland, Romania, Slovakia and Hungary has not caused any human infections in Europe.
China releases more pork from its reserves… China will release 30,000 MT of frozen pork from its state reserves on Jan. 17, the country’s China Merchandise Reserve Management Center announced today. The country has released 190,000 MT of frozen pork from its state reserves since early December as it works to shore up supplies ahead of the Lunar New Year holiday, which is China’s peak consumption period. Once its frozen pork stocks have been depleted, China is expected to really ramp up its imports of the meat. African swine fever left China will a large protein shortage.
Fading demand for the Impossible Whopper?... Burger King’s largest franchisee said sales of the plant-based Impossible Whopper are leveling off since the initial feeding frenzy when Burger King rolled out the non-meat burger nationwide in August.
Beef prices rebound… Cattle futures continue to move sideways as near-term direction is lacking. On one hand, the product market is giving signals a low could be works. Choice and Select boxed beef values surged $2.21 and $2.07, respectively, on Tuesday. But on the other hand, a narrowing of packer profit margins and generally non-stressful weather conditions limit could limit cash strength if the product market falters. February futures hold a modest premium to last week’s average cash price around $124.50.
Big hog slaughter tallies… Strong cutting margins have packers pushing aggressive slaughter schedules. Just two days into the workweek, this week’s kill is already up 55,000 head from year-ago. That has helped cash hog bids strengthen this week, despite an abundance of pigs. Yesterday cash hog bids climbed an average of 97 cents. But the greater focal point today will be details of the Phase 1 agreement with China that should be out around 10:30 a.m. CT today. Meat is expected to be one of the initial beneficiaries of Chinese purchases that are part of the deal.
Overnight demand news… Egypt purchased 180,000 MT of Russian wheat and 60,000 MT of Romanian wheat in a tender. Jordan purchased 60,000 MT of hard milling wheat to be sourced from optional origins. Turkey provisionally purchased a total of 550,000 MT of red milling wheat in a series of tenders, with much of the grain expected to be sourced in Russia, with the remainder going to other Black Sea nations and the European Union. Japan will import 160 MT of feed-quality barley via a simultaneous buy and sell auction.