After the Bell: China Buying U.S. Beans Again to Push Trade Deal Talks; Grains Weak

Posted on 12/09/2019 3:01 PM

Corn: Corn futures ended low-range with losses from 3/4 to 1 1/4 cents following a day that featured another narrow trading range. Corn futures were unable to capitalize on strength in the soybean market, as spreading with soybeans and spillover from winter wheat futures weighed on corn. In all, today’s trade is a disappointment for bulls and shows the struggles they face in trying to generate a price recovery. Weekly export inspections were within the range of pre-report estimates at 481,097 MT, though that was slightly lower than the previous week.  Managed money accounts were short 85,582 contracts of corn futures as of Dec. 3, which was a net reduction of 31,365 shorts from the previous week.  

Soybeans:  Soybeans closed higher but near midrange with meal falling against gains in the soyoil futures. January soybeans rose 7 ¾ cents to close at $8.97 ½, with March futures rising 8 cents to close at $9. 11 ¾. Futures rose as Chinese soy importers on Monday bought at least five bulk cargo shipments of U.S. soybeans, or about 300,000 metric tons (MT), for shipment in January and February after Beijing offered crushers at least 1 million metric tons (MMT) in new tariff waivers, Reuters reported. The fresh allotment of tariff waivers, which exempts importers from 30% higher tariffs on U.S. shipments, comes after buyers used up nearly all the 10 MMT in waivers awarded by Beijing in October. Some estimates of Chinese buying are as high as 1.5 MMT amid firm Gulf basis levels today. The buying was probably state-owned firms as private crushers face too many risks. China shipped about 63% of the 48.7 million bushels of soybeans inspected for export by USDA last week.

Wheat: March soft red winter wheat futures prices closed down 1/2 cent at $5.32 today, while March hard red winter wheat fell 5 cents to $4.26 and hit a two-week low. Spring wheat futures were steady to 1 ½ cents higher. Bulls are hoping to get back on track this week after the recent downside price correction, as there are still signs of improvement global demand for wheat at higher prices. Tuesday morning’s monthly USDA supply and demand report is expected to show very small cuts in both the U.S. and world wheat carryover projections. The market bulls still need fresh signs more of the world wheat crop may be threatened by adverse weather as overall supplies remain ample.

CottonCotton futures closed lower and near midrange, confined inside of the prior session’s range. March cotton fell 62 points to 65.38 cents.  Cotton futures fell on Monday ahead of the USDA’s crop production and supply and demand reports. Also, a lack of clear signals on progress in U.S.-China trade negotiations weighed on investor sentiment.Traders are looking for U.S. to trim 200,000 to 300,000 bales off the agency’s prior crop forecast of 20.82 million bales. The key number to watch will be the USDA export forecast changes from the 6.1 million bales forecasts in November. Traders have a wide range of estimates from 5.7 million to 6.9 million bales. The Dec. 15 deadline for new tariffs on Chinese goods is fast approaching and the market is a little wary that the two sides will fail to reach a new accord that might help to improve U.S. exports.

Hogs: February lean hogs closed down $0.85 at $66.70, while April hogs lost $0.725 at $72.975. Both contracts closed near mid-range today. Lean hog futures saw price pressure today despite news last Friday that China plans to cut tariffs on U.S. pork. Today’s price action reiterates that traders want to see actual U.S. pork sales to China increase. What seemed like an easy interim “phase one” deal between the U.S. and China to de-escalate their trade war faces a major new escalation of new U.S. tariffs on smartphones, laptops and toys imported from China due to take effect next Sunday, Dec. 15, unless an agreement can be reached. 

Cattle: Live cattle futures ended mixed to slightly lower and near midrange. February cattle fell 22.5 cents to $124.75 with April up 5 cents tat $124.40. January feeder cattle futures were down 2.5 cents at $141.525 and March feeders were up 70 cents at $142.275. Last week’s estimated cattle slaughter was estimated 679,000 head, the largest slaughter for the first week in December since 1996 and largest yet in 2019.   Expectations are that this week will equal or surpass last week, meaning that both slaughter and beef production in December 2019 will be record large. At midday, Choice beef lost $1.55 and Select fell $1.10 on moderately active business.  

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