After the Bell: Choppy Grain Trading Session on U.S./China Trade Uncertainty

Posted on 12/02/2019 2:46 PM


Corn: December corn futures, which are in delivery, finished 2 1/4 cents higher at $3.73 1/2. The March through December 2020 contracts finished narrowly mixed, with prices ranging from 1/4 cent lower to 3/4 cent higher. Corn futures finished near midrange on the day. Price action was light and choppy in the corn market today. Bulls tried to build on last Friday’s strong gains. Bears were reluctant to cover short positions. In the end, neither side proved to have the upper hand, meaning it was an uneventful day of trade to kick off the final monthly of 2020 trading.  Funds remain heavily short the corn market, suggesting a short-covering rally is possible. But the market needs either a technical or fundamental spark to spook funds out of many of their shorts. Given the demand struggles of the market, a technical spark seems more likely. Some end-of-year window-dressing is possible, but that rally will unlikely lead to significant price moves. South American weather is trending more favorable, especially in Brazil.  

Soybeans: Futures ended lower and at the bottom half of today’s range, erasing overnight gains. January soybeans fell 6 ¼ cents to $8.70 ½. January meal rose 40 cents to $293.50, with bean oil declining 42 points to 30.16 cents.  A fund put on a package of long corn and short soybean spreads right after the reopen that pushed March corn futures above its 20-day moving average. This sparked some additional short covering in corn before soybeans sank to new lows on US/China trade pessimism. Fund managers are now deciding on whether to go short soybeans.China expects the U.S. to roll back some tariffs on its exports as part of a trade deal, an official newspaper said Monday, reiterating Beijing's insistence that President Donald Trump's administration be "flexible" and "reasonable.” Traders are doubtful that the US/China can reach the finish line on trade talks before December 15th and are bracing for new tariffs on $157 billion of Chinese goods. China has utilized most of its 10 MMTs of duty-free U.S. soybean import licenses. New soybean sales are now stalled with Brazilian FOB offers cheaper beyond mid-February.  

Wheat: March SRW futures closed down 6 1/2 cents at $5.35 1/4. March HRW futures lost 7 3/4 cents at $4.39 1/4. Both markets saw corrective pullbacks today after hitting 4.5-month highs last Friday and closing at technically bullish weekly and monthly high closes. The wheat futures markets may have been pressured a bit today by President Trump threatening trade tariffs on Brazil and Argentina. The U.S. has been trying to get more HRW wheat export business in South America and today’s developments won’t help that cause.  The wheat futures market have been supported recently and are trending higher on concerns over tightening world supplies and short covering from speculators.  The Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) pegged production of the country's largest rural export at 15.85 MMT, down nearly 18% from its previous estimate in September of 19.2 MMT. The forecast is nearly 35% below the 10-year average, and the lowest level since 2008.  Heavy autumn rain is expected to lead to a fall in wheat sowings in France and Britain, raising early doubts over prospects for next year's harvest in Europe. Russian wheat prices posted a third consecutive weekly rise last week as higher demand from exporters and domestic processors offset rising supply from farmers, selling part of their stockpile before the New Year, analysts said on Monday.

Cotton: Futures ended lower and near session lows. March cotton fell 56 points to 64.80 cents. Cotton followed stock and other commodity markets lower on signs of little progress on reaching the Phase 1 deal to ease U.S.-Chinese trade tensions. Slowing global economic growth is dragging down global cotton consumption, new data from the International Cotton Advisory Committee (ICAC) show. Major economic indicators and continuing trade conflicts are dragging down the industry's multi-year winning streak. Figures show global consumption is continuing the recovery it began in the 2012-13 season, but is only expected to increase 0.3% in 2019-20, reaching 26.2 metric tons, slowing to the lowest levels in decades as global trade disputes remain unresolved. For the cotton sector, which has been buoyed in recent years by the thriving textile industries of East Asia and Southeast Asia, the recently revised IMF forecasts of a global synchronized slowdown are expected to stall growth for the region's manufacturing activities and demand for consumer goods.

Hogs : February lean hog futures closed down $2.025 at $66.15 today and dropped to a nearly four-month low. The hog futures market appears to be trading off news headlines regarding the U.S.-China trade-talks progress, which many are now deeming to have taken another turn south. President Trump today threatened to slap trade tariffs on Brazil and Argentina, and when asked about a U.S.-China trade deal coming soon said, “We’ll see.” Late last week the U.S. government officially supported the Hong Kong protest movement, with China then banning U.S. Navy ships and sailors from Hong Kong ports. Chinese Vice Premier Hu Chunhua said his country must resolutely work to achieve the target of recovering pig production numbers, and stabilize pork supply for the upcoming holidays--the Lunar New Year holiday in January and during the annual National People's Congress in March, the official Xinhua News Agency reported. That could mean a rise in demand for U.S. pork from China in the near term.

Cattle: Live cattle and feeder futures closed mixed but settled in the upper half of today’s ranges. February live cattle fell 40 cents to close at $125.80 with January feeder cattle down 12.5 cents at $142.225. Livestock markets and equities fell on news surrounding the U.S. and China trade talks ahead of the next potential bump up in U.S. tariffs slated for Dec. 15. A news story indicating the Chinese want to see the last set of tariffs removed as part of the phase one agreement has been circulating since yesterday and seems to have some traction--at least until the next story. The markets were also hit by President Donald Trump announcing he would restore tariffs on U.S. steel and aluminum imports from Brazil and Argentina in apparent retaliation for currency weakness he said was hurting U.S. farmers. The Tyson Fresh Meats Finney County Kansas beef facility is running today and expected to slaughter about 2,000 cattle per day this week. This week’s slaughter could reach 670k head, topping last year by 1,000 head. Last year’s fed kill for this week was a whopping 531,000 and it will be very interesting to see how close the industry comes to that this week. The largest fed kill since Finney has been down is 524,000 head, still an extremely high level of capacity utilization.


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