After the Bell: Grains, Soy Slip Lower on Reports of Delay in Completing China Trade Deal

Posted on 03/18/2019 2:57 PM

Corn: Corn futures closed down 1 to 1 1/2 cents today and nearer their daily lows. Grain trading started the week off with a downbeat tone today. A Chinese newspaper said Presidents Trump and Xi won’t meet until June to sign a new trade deal. Part of last week’s rally in the grains was tied to optimism a deal could be reached by April and lead to increased corn, ethanol and DDGs exports. USDA reported today that corn inspected for export fell to 795,241 MT last week, down from 803,351 MT a week earlier, and down sharply from 1.439 MMT a year ago. Today’s inspections report is worrisome for the corn market bulls. If the current weekly pace continues, USDA’s export forecast will not be met. Corn futures net-short positions expanded more than 81,100 futures and options contracts to an all-time record of 257,965 in the week ended March 12. The story going forward is whether funds want to hold record short positions with futures below fair value.

Soybeans: Soybean futures got off to a firmer start overnight, but the market was unable to sustain gains above Friday’s high and faltered. Futures spent the day session in negative territory and settled 3 ¼ to 3 ¾ higher for the day. Over the weekend, a Chinese newspaper reported that a meeting of U.S. President Donald Trump and Chinese President Xi Jinping may not occur until June—later than the April timeframe on which the market had been banking for last week’s gains. That led to a bit of a setback for the market that had recently rebounded on hopes that a deal including some big ag buys was near. Some light pressure also stemmed from the forecast for some warmer, drier weather this week, which should help melt thick snowcover around the Midwest and thaw soils in addition to allowing some floodwaters to recede. But more wet weather is likely the week following.

Wheat: Winter wheat futures closed down 5 to 6 cents and spring wheat rose 3 to 6 cents. May SRW futures fell 5 ½ cents to close at $4.56 ¾, with May HRW futures down 6 ½ cents at $4.36 ½. May spring wheat was up 6 cents at $5.60 ¾. The failure to hold early strength overnight on speculative short covering set the negative tone on Monday. The CFTC on Friday said fund net-short positions IN SRW wheat slipped 300 contracts to 72,148 futures and options, while in HRW funds increased net-short positions 4,415 contracts to a record 49,286 contracts. Winter wheat futures also fell on speculation that March rains are expected to aid U.S. crops if some of the wetter areas begin to dry out from Arkansas to Ohio the next 10 days. Flooding and more rain in the forecasts for the spring wheat region may hamper timely planting of U.S. spring wheat crops and helped to boost futures today. Cereal crops in the European Union are generally in decent condition after a mild winter but more rain is needed in a dry swath of southern Europe, the EU's crop-monitoring service said on Monday. However, low rainfall that accompanied the warm spell had accentuated dryness across southern Europe and in parts of central Europe following drought last year, the agency said. The soft wheat yield in the EU was projected at 6.04 metric tons per hectare, up 7.4% from 2018 and 1.7% above the average of the past five years. Wheat inspected for export in the week ended March 14 fell to 353,727 MT from 611,955 MT a week earlier and 444,806 MT a year ago. Traders have almost exhausted Ukraine's milling wheat export quota for the 2018-19 season, having exported 7.7 MMT of the agreed 8 million, analyst APK-Inform said on Friday.

Cotton: Cotton futures ended narrowly mixed with prices ranging from 23 points lower to 18 points higher. Price action was two-sided and light in the cotton market to open the week. News out of China that a meeting between President Donald Trump and China’s Xi Jinping might not come until June limited buyer interest. But funds didn’t want to add to their short stance. As of March 12, managed money accounts were short roughly 18,000 contracts of futures – another 2,000 contracts when including options. Funds are likely to remain comfortably short cotton until there’s a bullish catalyst – or something to spook them out of their short positions. But with a potential U.S./China trade deal looming, they may not be interested in building their short exposure. That suggests more relatively sideways trading until U.S. planted acreage comes into greater focus with the Prospective Plantings Report at the end of the month. Cotton acres will increase, but the report should give traders a better idea of how much more cotton producers intend to plant this year.

Hogs: The rally extended today with most contracts rising to new highs. April rose $2.225 to close at $71.025, still below the November contract high at $73.425. June rose $1.275 to $87.80. Hog prices rallied on rising U.S. cash markets and a surge in Chinese purchases of U.S. pork. China made its biggest purchases of U.S. pork in nearly two years in the week ended March 7, USDA data last week showed, as Chinese hog prices surged to 14-month highs. The average U.S. cash hog price rose $2.67 to $54.20 on Friday and up $8.34 for the week. Pork cutout values rose $1.10 on Monday after rising $4.85 last week. Prices are the highest since Jan. 21, but packer margins narrowed about $10 last week to $20.60, according to Slaughter on Monday fell to 463,000 head from 475,000 head a week ago and equal to a year earlier, USDA estimates. Early gains were limited, and prices traded lower after U. S. Customs and Border Protection agents made the biggest seizure of agricultural product in American history last Friday. The seizure in New Jersey of a million pounds of smuggled Chinese pork raises major fears that additional illegal shipments slipped through customs and may infect the U.S. hog herd with African swine fever and shut down U.S. exports. China's second-largest pork producer Muyuan Foodstuffs says it will increase production this year despite a serious outbreak of swine fever, betting on reduced supply and surging prices to boost profits.

Cattle: April live cattle fell 67.5 cents to close near the session low. However, June live cattle futures rose 72 1/2 cents and hit a new contract high today. Nearby feeder cattle futures were down 15 to 50 cents. However, the May feeder contract is turning more bullish on the chart as prices Friday hit a four-month high. Good consumer beef demand amid a solid U.S. economy, along with rising hog prices, are working to push cattle futures prices north. Dressed beef weights are declining, which suggest feedlot marketings are very current. Wholesale Choice carcass values rose $1.25 today and Select was up 70 cents. Movement remained slow at 37 loads. Seasonally, the cutout is expected to soften in the coming weeks, likely finding a short-term low in April. Cash cattle prices were down about $1 last week. However, look for steady to possibly firmer cash cattle prices this week.

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