After the Bell: Grains, Soy Retreat on Chart Selling Waiting for China Deal Clarity

Posted on 12/11/2019 3:31 PM


Corn: March corn futures closed down 5 3/4 cents at $3.71 1/4. Prices closed near the session low and hit a three-month low today. December 2020 futures hit a contract low today and finished down 3 cents at $3.88. Prices dropped today after USDA on Tuesday unexpectedly raised its world carryover projection by 4.6 million metric tons from last month. The agency will not release a U.S. production forecast until Jan. 10, so the supply bulls must wait. But even then, USDA may offset any crop reductions with smaller usage forecasts. U.S. exports continue to be very sluggish. U.S. ethanol production rose 1,200 barrels per day (BPD) to 1.072 million BPD last week. That was the tenth straight weekly increase. That bullish news was completely offset by ethanol stockpiles surging 1.176 million barrels, to 21.815 million barrels, last week--the fifth-largest weekly increase on record. That will hurt margins and slow production going forward.

Soybeans: Soybean futures finished low-range with losses of 5 3/4 to 7 3/4 cents through the November 2020 contract. Meal futures dropped $3-plus through the March contract. Soyoil futures ended 23 to 24 points lower. USDA confirmed some Chinese soybean purchases this morning, announcing sales of 585,000 MT for 2019-20. An additional 140,000 MT of soybeans sales to “unknown destinations” were also announced. But after six days of gains and rumors of Chinese purchases on Monday, the market had a disappointing reaction today. Traders continue to consistently fade confirmed news of Chinese demand. The next shot of demand news will come tomorrow in the form of weekly export sales for the week ended Dec. 5, with traders expecting sales between 500,000 MT and 1.1 MMT. Traders will also continue to monitor U.S. and China trade talks. The Dec. 15 deadline is approaching for the U.S. to raise tariffs on Chinese imports but reports today signaled the U.S. was prepared to delay that increase.

Cotton: Cotton prices closed slightly lower but off early session lows. March cotton fell 5 points to 65.88 cents. Cotton futures held steady on Wednesday, buoyed by a positive global supply and demand report from USDA Tuesday, while investors remained cautious ahead of a Dec. 15 deadline for fresh U.S. tariffs on Chinese goods. On Tuesday, USDA cut U.S. production and carryover forecasts, but price action was not especially impressive given the bullish surprise.  U.S. President Donald Trump has only days to decide whether to impose tariffs on nearly $160 billion in Chinese goods, a move that would exacerbate the 17-month trade war. The White House's top economic and trade advisers are expected to meet in coming days with Trump over the decision, a source told Reuters. 

Wheat: March soft red winter wheat futures fell 4 1/2 cents to $5.19 1/4 today and hit a three-week low. March hard red winter futures lost 1/2 cent at $4.30 3/4. Spring wheat futures were steady to 3 cents higher. Wheat futures struggled today despite USDA reducing the U.S. carryover forecast by 40 million bushels in its monthly supply and demand report Tuesday, mainly because world wheat inventories were raised. Traders are awaiting Thursday morning’s weekly USDA export sales report, which is expected to show U.S. wheat sales of 200,000 to 450,000 metric tons in the 2019-20 marketing year.  

Hogs: February lean hog futures fell 25 cents to close at $67.725 today. Prices closed near mid-range in quiet trading today. Hog futures market traders are tentative ahead of the Sunday (Dec. 15) deadline for President Trump to impose an additional $156 billion in tariffs on Chinese goods. The biggest hurdle in a Phase 1 trade deal continues to be the U.S. insistence that China guarantee to buy a specific amount of U.S. farm products. China wants to link the size of any upfront commitment to purchase U.S. farm products on how much tariff relief the U.S. would be willing to extend immediately. Trump will be the one to make the final decision on new Chinese tariffs if he doesn’t like the direction of the U.S.-China trade deal talks this week, White House trade adviser Peter Navarro said. The CME lean hog index is projected to be up 35 cents today and should continue to rise given ongoing cash strength.

Cattle:  Cattle and feeder cattle futures closed higher and near session highs. February cattle rose 87.5 cents to $125.45 and March feeder cattle futures $1.375 to $143.90. Cattle rose on expectations that cash bids will firm as packers need more supplies. Slaughter this week is estimated at 365,000 head the first three days of the week, up from 357,000 head last week when slaughter reached a new high for 2019. Beef cutout fell again Wednesday with Choice down $1.77 and Select sliding $1.16 on strong sales. Boxed beef values continue to decline seasonally, though spot volume is picking up significantly on the break as bargain hunters stepped in and book more beef. It’s been October since wholesale prices have been this low. Retail features this week finally focused on something besides beef, as retailers featured hams and pork chops. 

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